Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 08, 2019 | Jun. 30, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | Merchants Bancorp | ||
Entity Central Index Key | 0001629019 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 460.9 | ||
Entity Common Stock, Shares Outstanding | 28,704,163 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Assets | ||
Cash and due from banks | $ 25,855 | $ 18,905 |
Interest-earning demand accounts | 310,669 | 340,614 |
Cash and cash equivalents | 336,524 | 359,519 |
Securities purchased under agreements to resell | 6,875 | 7,043 |
Trading securities | 163,419 | 140,837 |
Available for sale securities | 331,071 | 408,371 |
Federal Home Loan Bank (FHLB) stock | 7,974 | 7,539 |
Loans held for sale (includes $11,886 at fair value for 2018) | 832,455 | 995,319 |
Loans receivable, net of allowance for loan losses of $12,704, and $8,311, respectively | 2,045,423 | 1,366,349 |
Premises and equipment, net | 15,136 | 5,354 |
Mortgage servicing rights | 77,844 | 66,079 |
Interest receivable | 13,827 | 8,326 |
Goodwill | 17,477 | 3,902 |
Intangible assets, net | 3,542 | 1,512 |
Other assets and receivables | 32,596 | 22,983 |
Total assets | 3,884,163 | 3,393,133 |
Deposits | ||
Noninterest-bearing | 182,879 | 620,700 |
Interest-bearing | 3,048,207 | 2,322,861 |
Total deposits | 3,231,086 | 2,943,561 |
Borrowings | 195,453 | 56,612 |
Deferred and current tax liabilities, net | 15,444 | 12,422 |
Other liabilities | 20,943 | 13,064 |
Total liabilities | 3,462,926 | 3,025,659 |
Commitments and Contingencies | ||
Shareholders' Equity | ||
Common stock, without par value, Authorized - 50,000,000 shares, Issued and outstanding - 28,694,036 shares at December 31, 2018 and 28,685,167 shares at December 31, 2017 | 135,057 | 134,891 |
Preferred stock - $1,000 per share, without par value, Authorized - 5,000,000 shares, Issued and outstanding - 41,625 shares | 41,581 | 41,581 |
Retained earnings | 244,909 | 192,008 |
Accumulated other comprehensive loss | (310) | (1,006) |
Total shareholders' equity | 421,237 | 367,474 |
Total liabilities and shareholders' equity | $ 3,884,163 | $ 3,393,133 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Loans held for sale at fair value | $ 11,886 | |
Allowance for loans receivable | $ 12,704 | $ 8,311 |
Stockholders' Equity: | ||
Common stock, without par value (in dollars per share) | ||
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 28,694,036 | 28,685,167 |
Common stock, shares outstanding | 28,694,036 | 28,685,167 |
Preferred stock, stated value (in dollars per share) | $ 1,000 | $ 1,000 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 41,625 | 41,625 |
Preferred stock, shares outstanding | 41,625 | 41,625 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Interest Income | |||
Loans | $ 119,457 | $ 79,922 | $ 62,563 |
Investment securities: | |||
Trading | 5,012 | 5,187 | 4,516 |
Available for sale | 6,448 | 4,531 | 3,249 |
Federal Home Loan Bank stock | 385 | 321 | 320 |
Other | 9,261 | 4,426 | 2,291 |
Total interest income | 140,563 | 94,387 | 72,939 |
Interest Expense | |||
Deposits | 42,216 | 20,003 | 11,663 |
Borrowed funds | 8,376 | 7,787 | 7,305 |
Total interest expense | 50,592 | 27,790 | 18,968 |
Net interest income | 89,971 | 66,597 | 53,971 |
Provision for loan losses | 4,629 | 2,472 | 960 |
Net Interest Income After Provision for Loan Losses | 85,342 | 64,125 | 53,011 |
Noninterest Income | |||
Gain on sale of loans | 39,266 | 37,790 | 24,755 |
Loan servicing fees, net | 5,741 | 6,273 | 280 |
Mortgage warehouse fees | 2,550 | 2,608 | 3,015 |
Gains on sale of investments available for sale related to accumulated other comprehensive earnings reclassifications | 24 | ||
Other income | 2,028 | 1,009 | 430 |
Total noninterest income | 49,585 | 47,680 | 28,504 |
Noninterest Expense | |||
Salaries and employee benefits | 32,240 | 21,472 | 14,313 |
Loan expenses | 4,621 | 4,097 | 4,251 |
Occupancy and equipment | 2,788 | 1,602 | 1,344 |
Professional fees | 2,585 | 1,516 | 1,298 |
Deposit insurance expense | 1,024 | 930 | 1,149 |
Technology expense | 1,544 | 1,171 | 985 |
Other expense | 6,098 | 3,856 | 3,380 |
Total noninterest expense | 50,900 | 34,644 | 26,720 |
Income Before Income Taxes | 84,027 | 77,161 | 54,795 |
Provision for income taxes | 21,153 | 22,477 | 21,668 |
Net Income | 62,874 | 54,684 | 33,127 |
Dividends on preferred stock | (3,330) | (3,330) | (2,002) |
Net Income Allocated to Common Shareholders | $ 59,544 | $ 51,354 | $ 31,125 |
Basic Earnings Per Share (in dollar per share) | $ 2.08 | $ 2.28 | $ 1.47 |
Diluted Earnings Per Share (in dollar per share) | $ 2.07 | $ 2.28 | $ 1.47 |
Weighted-Average Shares Outstanding Basic (in Shares) | 28,692,955 | 22,551,452 | 21,111,208 |
Weighted-Average Shares Outstanding Diluted (in Shares) | 28,724,419 | 22,568,154 | 21,113,435 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Comprehensive Income | |||
Net Income | $ 62,874 | $ 54,684 | $ 33,127 |
Other Comprehensive Income (Loss): | |||
Net change in unrealized losses on investment securities available for sale, net of (taxes) benefits of $(294), $256, and $262 respectively | 939 | (378) | (382) |
Less: Reclassification adjustment for gains included in net income, net of $10 tax expense in 2016 | 14 | ||
Other comprehensive income (loss) for the period | 939 | (378) | (396) |
Comprehensive Income | $ 63,813 | $ 54,306 | $ 32,731 |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Comprehensive Income | |||
Net change in unrealized losses on investment securities available for sale, (taxes) benefits | $ (294) | $ 256 | $ 262 |
Reclassification adjustment for gains included in net income, tax expense | $ 10 |
Consolidated Statement of Share
Consolidated Statement of Shareholders' Equity - USD ($) $ in Thousands | Common StockIPO | Common Stock | Preferred StockPrivate Placement | Preferred Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Private Placement | IPO | Total |
Balance at beginning of the period at Dec. 31, 2015 | $ 20,061 | $ 10,000 | $ 118,371 | $ (232) | $ 148,200 | ||||
Balance at beginning of the period (in shares) at Dec. 31, 2015 | 21,111,200 | 10,000 | |||||||
Condensed Consolidated Statements of Shareholders’ Equity | |||||||||
Net income | 33,127 | 33,127 | |||||||
Shares issued | $ 31,581 | $ 31,581 | |||||||
Shares issued (in shares) | 31,625 | ||||||||
Dividends on preferred stock, $80.00 per share | (2,002) | (2,002) | |||||||
Dividends on common stock, $0.24, $0.20 and $0.20 per share for the year ended 2018, 2017 and 2016 respectively | (4,222) | (4,222) | |||||||
Other comprehensive income (loss) | (396) | (396) | |||||||
Balance at end of the period at Dec. 31, 2016 | $ 20,061 | $ 41,581 | 145,274 | (628) | 206,288 | ||||
Balance at end of the period (in shares) at Dec. 31, 2016 | 21,111,200 | 41,625 | |||||||
Condensed Consolidated Statements of Shareholders’ Equity | |||||||||
Net income | 54,684 | 54,684 | |||||||
Shares issued | $ 106,245 | $ 106,245 | |||||||
Shares issued (in shares) | 7,187,500 | ||||||||
Shares issued for stock compensation plans | $ 458 | 458 | |||||||
Shares issued for stock compensation plans (in shares) | 3,196 | ||||||||
Shares issued for MCS acquisition | $ 8,127 | 8,127 | |||||||
Shares issued for MCS acquisition (in shares) | 383,271 | ||||||||
Dividends on preferred stock, $80.00 per share | (3,330) | (3,330) | |||||||
Dividends on common stock, $0.24, $0.20 and $0.20 per share for the year ended 2018, 2017 and 2016 respectively | (4,620) | (4,620) | |||||||
Other comprehensive income (loss) | (378) | (378) | |||||||
Balance at end of the period at Dec. 31, 2017 | $ 134,891 | $ 41,581 | 192,008 | (1,006) | 367,474 | ||||
Balance at end of the period (in shares) at Dec. 31, 2017 | 28,685,167 | 41,625 | |||||||
Condensed Consolidated Statements of Shareholders’ Equity | |||||||||
Net income | 62,874 | 62,874 | |||||||
Shares issued for stock compensation plans | $ 166 | 166 | |||||||
Shares issued for stock compensation plans (in shares) | 8,869 | ||||||||
Dividends on preferred stock, $80.00 per share | (3,330) | (3,330) | |||||||
Dividends on common stock, $0.24, $0.20 and $0.20 per share for the year ended 2018, 2017 and 2016 respectively | (6,886) | (6,886) | |||||||
Reclassification of deferred tax asset due to tax reform | 243 | (243) | |||||||
Other comprehensive income (loss) | 939 | 939 | |||||||
Balance at end of the period at Dec. 31, 2018 | $ 135,057 | $ 41,581 | $ 244,909 | $ (310) | $ 421,237 | ||||
Balance at end of the period (in shares) at Dec. 31, 2018 | 28,694,036 | 41,625 |
Consolidated Statement of Sha_2
Consolidated Statement of Shareholders’ Equity (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Dividends on preferred stock per share | $ 80 | $ 80 | $ 80 |
Dividends on common stock per share | $ 0.24 | $ 0.20 | |
Preferred Stock | |||
Offering expenses on issuance of stock | $ 44 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Operating activities: | |||
Net income | $ 62,874 | $ 54,684 | $ 33,127 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation | 461 | 296 | 278 |
Provision for loan losses | 4,629 | 2,472 | 960 |
Deferred income tax, net | 2,313 | (2,415) | (1,436) |
Gain on sale of securities | (24) | ||
Gain on sale of loans | (39,266) | (37,790) | (24,755) |
Proceeds from sales of loans | 18,027,460 | 18,498,028 | 20,022,010 |
Loans and participations originated and purchased for sale | (17,832,035) | (18,702,694) | (20,145,855) |
Change in mortgage servicing rights for paydowns and fair value adjustments | 2,348 | 2,554 | 7,628 |
Net change in: | |||
Trading securities | (22,582) | (3,162) | (29,806) |
Other assets and receivables | (10,023) | 11,501 | (16,170) |
Other liabilities | 3,419 | (850) | 4,073 |
Other | 3,992 | 1,490 | 199 |
Net cash provided by operating activities | 203,590 | (175,886) | (149,771) |
Investing activities: | |||
Net change in securities purchased under agreements to resell | 168 | (1,651) | 122 |
Purchases of available-for-sale securities | (47,040) | (199,635) | (290,396) |
Proceeds from the sale of available-for-sale securities | 6,431 | 0 | 7,371 |
Proceeds from calls, maturities and paydowns of available-for-sale securities | 188,252 | 116,506 | 210,967 |
Purchases of loans | (138,965) | (133,329) | (75,249) |
Net change in loans receivable | (484,102) | (300,889) | (119,075) |
Proceeds from sale of home equity loans held for investment | 14,900 | ||
Purchase of Federal Home Loan Bank stock | (956) | ||
Proceeds from sale of Federal Home Loan Bank stock | 700 | ||
Proceeds from sale of assets | 10 | 40 | |
Purchases of premises and equipment | (9,195) | (788) | (1,204) |
Purchases of mortgage servicing rights | (6,313) | (1,209) | (1,357) |
Purchase of limited partnership interests | (3,810) | (2,694) | (11,126) |
Cash (paid) received in acquisition of subsidiary | (14,320) | 363 | |
Other investing activities | 74 | 189 | (295) |
Net cash used in investing activities | (509,066) | (523,137) | (265,302) |
Financing activities: | |||
Net change in deposits | 155,002 | 514,940 | 389,101 |
Proceeds from Federal Home Loan Bank borrowings | 1,089,107 | 754,150 | 220,000 |
Repayment of Federal Home Loan Bank borrowings | (931,994) | (754,544) | (220,485) |
Proceeds from issuance of common stock | 106,245 | ||
Proceeds from issuance of preferred stock | 31,581 | ||
Proceeds from notes payable | 19,116 | ||
Payments on notes payable | (38,534) | ||
Dividends | (10,216) | (7,950) | (6,224) |
Net cash provided by financing activities | 282,481 | 612,841 | 413,973 |
Net Change in Cash and Cash Equivalents | (22,995) | (86,182) | (1,100) |
Cash and Cash Equivalents, Beginning of Period | 359,519 | 445,701 | 446,801 |
Cash and Cash Equivalents, End of Period | 336,524 | 359,519 | 445,701 |
Additional Cash Flows Information: | |||
Interest paid | 49,276 | 26,763 | 17,799 |
Income taxes paid | 16,965 | 27,050 | $ 22,230 |
The Company purchased all of the capital stock of FMBI on January 2, 2018, the capital stock of FMNBP on October 1, 2018, and the assets of NattyMac, LLC on December 31, 2018. The Company also purchased all of the capital stock for MCS on August 15, 2017. In conjunction with the acquisitions, liabilities were assumed as follows: | |||
Fair value of assets acquired | 168,153 | 12,666 | |
Cash paid for the capital stock/fair value common stock issued | 29,872 | 8,127 | |
Fair value of liabilities assumed | $ 138,281 | $ 4,539 |
Nature of Operations and Summar
Nature of Operations and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Operations and Summary of Significant Accounting Policies | |
Nature of Operations and Summary of Significant Accounting Policies | Note 1: Nature of Operations and Summary of Significant Accounting Policies Nature of Operations and Principles of Consolidation The accompanying consolidated financial statements include the accounts of Merchants Bancorp, a registered bank holding company (the “Company”) and its wholly owned subsidiaries, Merchants Bank of Indiana (“Merchants Bank”) and Farmers-Merchants Bank of Illinois (“FMBI,” formerly Joy State Bank prior to October 22, 2018). Merchants Bank’s direct and indirect subsidiaries include Merchants Capital Corp. (“MCC,” formerly P/R Mortgage and Investment Corp prior to October 1, 2018), Merchants Capital Servicing, LLC (“MCS,” formerly RICHMAC Funding, LLC prior to November 1, 2018), Ash Realty Holdings, LLC (“Ash Realty”), MBI Midtown West, LLC (“MMW”), Natty Mac Funding, Inc. (“NMF”), and OneTrust Funding, Inc. The Company also acquired Farmers-Merchants National Bank of Paxton (‘FMNBP”) on October 1, 2018 through a merger with FMBI, with FMBI as the surviving entity. All these entities are collectively referred to as the “Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Merchants Bank operates under an Indiana state bank charter and provides full banking services. As a state bank and non-Federal Reserve member, it is subject to the regulation of the Indiana Department of Financial Institutions (“IDFI”) and the Federal Deposit Insurance Corporation (“FDIC”). The Company is further subject to regulations of the Board of Governors of the Federal Reserve System (“Federal Reserve”) governing bank holding companies. Merchants Bank operates from four locations in Indiana, including Lynn, Spartanburg, Carmel and Indianapolis. Merchants Bank generates commercial, mortgage and consumer loans and receives deposits from customers located primarily in Hamilton, Randolph and surrounding counties in Indiana. Merchants Bank’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Merchants Bank’s Mortgage Warehousing segment funds and participates in single family and multi‑family, agency eligible loans across the nation. FMBI operates under an Illinois state bank charter and provides full banking services. As a state bank and non-Federal Reserve member, it is subject to the regulation of the Illinois Department of Financial and Professional Regulation (“IDFPR”) and the FDIC. FMBI operates from five locations in Illinois, including Joy, New Boston, Paxton, Melvin, and Piper City. MCC was formed in August 1990, in the state of Indiana. MCC is primarily engaged in mortgage banking, specializing in lending for multi‑family rental properties and healthcare facilities. It is an FHA approved mortgagee and a Ginnie Mae, Fannie Mae, and Freddie Mac issuer. In August 2012, Merchants Bank established a qualifying subsidiary, Ash Realty, for the purpose of acquiring, holding and liquidating real estate acquired by Merchants Bank as a result of various foreclosures. NMF was formed in April 2014, in the state of Indiana. Prior to the Company acquiring all the assets of NattyMac Funding, LLC from Home Point Financial Corporation (“Home Point”) on December 31, 2018, NMF provided loan participations and participation warehouse financing to Home Point, its subsidiaries, and customers. MMW was formed in 2016 to hold land and improvements for the Company’s new headquarters building that is expected to be complete in the summer of 2019. OneTrust Funding, Inc. was formed in April 2018, in the state of Indiana, to facilitate warehouse financing arrangements, similar to those between NMF and Home Point. Recent Acquisitions On August 15, 2017, Merchants Bank acquired 100% of the equity interests of MCS (formerly RICHMAC Funding, LLC), which was a national multi-family housing mortgage lender and servicer. The purchase price was paid in shares of Company common stock with a value of $8.1 million. As of December 31, 2018, the Company recorded goodwill and intangible assets totaling $3.8 million and $1.6 million, respectively, in connection with the acquisition. As a result of the acquisition, the Company expanded its product offerings and benefited from economies of scale. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. On May 8, 2017, the Company entered into a Stock Purchase Agreement to acquire FMBI (formerly Joy State Bank). The acquisition closed on January 2, 2018 at a total cost of approximately $5.5 million. At December 31, 2017 Joy State Bank had $43 million in assets. The Company recorded goodwill and intangible assets totaling $988,000 and $478,000, respectively, in connection with the acquisition. The intangible assets consisted of core deposit intangibles that are being amortized over 10 years on an accelerated basis. The acquired time deposits of $16.7 million were recorded at a fair value of $16.9 million. The fair value premium of $185,000 is being accreted against interest expense over 20 months. The acquired loan portfolio of $27.9 million was recorded at a fair value of $27.5 million. The fair value discount of $458,000 is being accreted to interest income on a straight-line basis over an average of 39 months in accordance with ASC 310-20. While there were some loans identified for potential classification under ASC 310-30, they were not material to the transaction. On October 22, 2018, the Company changed the name of Joy State Bank to Farmers-Merchants Bank of Illinois (“FMBI”). Certain fair value measurements and the purchase price allocation are still being evaluated by management and are subject to change during the measurement period. As a result of the acquisition, the Company increased its deposit base and benefited from economies of scale. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. On October 1, 2018, the Company acquired FM Bancorp, Inc., a bank holding company, and its wholly owned subsidiary, Farmers-Merchants National Bank of Paxton (“FMNBP”). On that date, FM Bancorp, Inc. ultimately merged with and into the Company, with the Company as the surviving entity, and FMNBP merged with and into Joy State Bank, with Joy State Bank as the surviving bank. Effective October 22, 2018, Joy State Bank’s name changed to Farmers-Merchants Bank of Illinois (“FMBI”). Under the terms of the merger agreement, shareholders of the 27,537 outstanding shares of FM Bancorp, Inc. were compensated $795.29 per share, for a total purchase price of $21.9 million. As of September 30, 2018, FM Bancorp, Inc. and Farmers-Merchants National Bank of Paxton had total assets of approximately $110.0 million, available for sale securities of $66.3 million, deposits of approximately $95.7 million, and net loan receivables of approximately $35.0 million. The Company recorded goodwill and intangible assets totaling $7.2 million and $1.9 million. The intangible assets consisted of core deposit intangibles that are being amortized over 10 years on an accelerated basis. The acquired available for sale securities of $66.3 million were recorded at fair value. A fair value discount associated with securities of $1.0 million is being accreted into interest income, in accordance with ASC 310-20. While there were some loans identified for potential classification under ASC 310-30, they were not material to the transaction. The acquired gross loan portfolio of $35.4 million was recorded at a fair value of $34.8 million. The fair value discount of $625,000 includes a discount related to interest assumptions for $279,000 and to credit assumptions for $346,000. The portion related to interest assumptions is being accreted into interest income on a straight-line basis over an average of 72 months in accordance with ASC 310-20. The discount portion related to credit assumptions is being accreted into interest income over the life of the loan. The acquired deposits of $95.7 million were recorded at a fair value of $95.7 million. Certain fair value measurements and the purchase price allocation are still being evaluated by management and are subject to change during the measurement period. As a result of the acquisition, the Company increased its deposit base and benefited from economies of scale. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. On December 31, 2018, the Company acquired the assets of NattyMac, LLC, a warehouse lender operating out of Clearwater, Florida, from Home Point Financial Corporation (“Home Point”). The Company also fully repaid Home Point the balance of, and all interest owed on, the $30 million subordinated debt it had previously invested in the Company. Goodwill totaling $5.0 million was recorded by the Company. Certain fair value measurements, intangibles, and the purchase price allocation are still being evaluated by management and are subject to change during the measurement period. As a result of the acquisition, the Company expects to increase its geographic footprint in the warehouse business, reduce its costs of borrowing, increase the earnings generated from its warehouse business, and benefit from its experienced talent pool. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. Given the impact of the acquisitions was immaterial to the Company and its results of operations, pro forma information has not been included. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, loan servicing rights and fair values of financial instruments. Cash and Cash Equivalents The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of cash amounts due from depository institutions, interest‑bearing deposits in other banks, money market accounts, and federal funds sold. At December 31, 2018, the Company’s cash accounts exceeded federally insured limits by approximately $331.2 million. Included in this amount is approximately $295.4 million with the Federal Reserve Bank, $12.9 million with the Federal Home Loan Bank of Indianapolis, and $15,000 with the Federal Home Loan Bank of Chicago. At December 31, 2017, the Company’s cash accounts exceeded federally insured limits by approximately $349.4 million. Included in this amount is approximately $327.4 million with the Federal Reserve Bank and $3.5 million with the Federal Home Loan Bank of Indianapolis. Securities purchased under agreements to resell Securities purchased pursuant to a simultaneous agreement (RRA) to resell the same securities at a specified price and date generally have maturity dates of 90 days or less and are carried at cost. Every 90 days the RRAs rollover. Trading Activities The Company engages in trading activities. Securities that are held principally for resale in the near term are recorded in the trading assets account at fair value with changes in fair value recorded in earnings. Trading securities include FHA and conventional participation certificates. Interest is included in net interest income. Securities Certain debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method. For debt securities with fair value below amortized cost when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other‑than‑temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held‑to‑maturity debt securities, the amount of other‑than‑temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other‑than‑temporary impairment is amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security. Loans Held for Sale under Mortgage Banking Activities The Company uses participation agreements to fund mortgage loans held for sale from closing or purchase until sale to an investor. Under a participation agreement the Company elects to purchase a participation interest of up to 100% in individual loans. The Company shares proportionately in the interest income and the credit risk until the loan is sold to an investor. The Company holds the collateral until it is sent under a bailee arrangement to the investor. Typical investors are large financial institutions or government agencies. These loans are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance and included in noninterest income. Other mortgage loans originated and intended for sale in the secondary market, for which the fair value option has been elected, are carried at fair value at each balance sheet date. The Company believes that the fair value is the best indicator of the resolution of these loans. The difference between the cost and fair value was not material at December 31, 2018. For all loans held for sale, interest earned from the time of funding to the time of sale is accrued and recognized as interest income. Gains and losses on loan sales are recorded in noninterest income, and generally direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan. The gain on sale of loans in the income statement may include placement and origination fees, capitalized mortgage servicing rights, trading gains and losses and other related income . Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for unearned income, charge‑offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. For loans amortized at cost, interest income is accrued based on the unpaid principal balance. The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well‑secured and in process of collection. Past‑due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. For loans that are placed on nonaccrual or that are charged off, all accrued interest is reversed against interest income. The interest on these loans is applied to the principal balance until the loan can be returned to an accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. For all loan portfolio segments, the Company promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectable based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge‑off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral. When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms. The Company uses warehouse loans or credit to fund mortgage loans held for sale from closing until sale to an investor. Under a warehousing arrangement the Company funds a mortgage loan as secured financing. The warehousing arrangement is secured by the underlying mortgages and a combination of deposits, personal guarantees and advance rates. The Company holds the collateral until it is sent under a bailee arrangement instructing the investor to send proceeds to the Company. Typical investors are large financial institutions or government agencies. Interest earned from the time of funding to the time of sale is recognized as interest income as accrued. Fees earned agreements are recognized when collected as noninterest income. Allowance for Loan Losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non‑classified loans and is based on historical charge‑off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case‑by‑case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan‑by‑loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Company utilizes discounted cash flows to determine the level of impairment, the Company includes the entire change in the present value of cash flows as bad debt expense. Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower. In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Company attempts to work out an alternative payment schedule with the borrower in order to optimize collectability of the loan. A troubled debt restructuring (TDR) occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. Nonaccrual loans, including TDRs that have not met the six-month minimum performance criterion, are reported as nonperforming loans. For all loan classes, it is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider its return to accrual status. A loan is generally classified as nonaccrual when the Company believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due. With regard to determination of the amount of the allowance for credit losses, restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above. Premises and Equipment Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight‑line method over the estimated useful lives of the assets. The estimated useful lives for premises and equipment are as follows: Buildings 10 to 40 years Leasehold improvements 5 to 39 years Furniture, fixtures and equipment 3 to 10 years Vehicles 5 years Expenditures for property and equipment and for renewals or betterments that extend the originally estimated economic life of the assets are capitalized. Expenditures for maintenance and repairs are charged to expense. When an asset is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations. Federal Home Loan Bank Stock Federal Home Loan Bank (FHLB) stock is a required investment for institutions that are members of a FHLB. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment. Other Real Estate Owned Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from other real estate. Mortgage Servicing Rights Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860‑50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company has elected to initially and subsequently measure the mortgage servicing rights for mortgage loans using the fair value method. Under the fair value method, the servicing rights are carried in the balance sheet at fair value and the changes in fair value are reported in earnings in the period in which the changes occur. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model is from an independent third party and it incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds, prepayment penalties, and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage‑servicing right and may result in a reduction to noninterest income. Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The change in the fair value of the mortgage‑servicing rights is netted against loan servicing fee income. Goodwill and Intangible Assets Goodwill is tested annually for impairment or more frequently if impairment indicators are present. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. Intangible assets, which include licenses and trade names, are amortized over a period ranging from 84 to 120 months using a straight line method of amortization. Also included are core deposit intangibles that are amortized over a 10 year period using the accelerated sum of the years digits method of amortization. On a periodic basis, the Company evaluates events and circumstances that may indicate a change in the recoverability of the carrying value. Investment in Qualified Affordable Housing Limited Partnerships The Company has elected to account for its investment in affordable housing tax credit limited partnerships using the proportional amortization method described in FASB ASU 2014‑01, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (A Consensus of the FASB Emerging Issues Task Force).” Under the proportional amortization method, an investor amortizes the initial cost of the investment to income tax expense in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. The investment in the limited partnerships is included in other assets in the consolidated balance sheets. Income Taxes The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes ). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more‑likely‑than‑not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more‑likely‑than‑not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. With a few exceptions, the Company is no longer subject to U.S. federal, state and local or non‑U.S. income tax examinations by tax authorities for years before 2015. The Company recognizes interest and penalties, if any, on income taxes as a component of income tax expense. The Company files consolidated income tax returns with its subsidiaries. Earnings Per Share Basic earnings per share is the Company’s net income available to common shareholders, which represents net income less dividends paid or payable to preferred stock shareholders, if any, divided by the weighted‑average number of common shares outstanding during each period. Diluted earnings per share is calculated in the same manner as basic earnings per share, but also reflects the issuance of additional common shares that would have been diluted if such shares had been outstanding, as well as any adjustment to income that would result from the assumed issuance. Share‑based Compensation Plan The Company has a restricted stock plan that provides for annual awards of shares to certain members of senior management based upon the Company’s performance and attainment of certain performance goals established by the Board of Directors. Share awards are valued at the estimated fair value on the date of the award and generally vest over three years. Compensation expense for the awards is recognized in the consolidated financial statements ratably over the vesting period. Comprehensive Income Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) and accumulated other comprehensive income consist entirely of unrealized appreciation (depreciation) on available‑for‑sale investment securities. Reclassifications Certain reclassifications have been made to the 2017 and 2016 financial statements to conform to the financial statement presentation as of and for the year ended December 31, 2018. These reclassifications had no effect on net income. |
Restriction on Cash and Due Fro
Restriction on Cash and Due From Banks | 12 Months Ended |
Dec. 31, 2018 | |
Restriction on Cash and Due From Banks | |
Restriction on Cash and Due From Banks | Note 2: Restriction on Cash and Due From Banks The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at December 31, 2018 and 2017 was $114.2 million and $104.2 million, respectively. |
Securities
Securities | 12 Months Ended |
Dec. 31, 2018 | |
Securities | |
Securities | Note 3: Securities Trading Securities Securities that are held principally for resale in the near term are recorded as trading securities at fair value. Trading securities include FHA and conventional Fannie Mae and Freddie Mac participation certificates. The unrealized gains included in earnings for trading securities totaled $870,000 and $643,000 at December 31, 2018 and 2017, respectively. Securities Available-For-Sale The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows: December 31, 2018 Gross Gross Approximate Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In thousands) Available-for-sale securities: Treasury notes $ 11,928 $ 26 $ 13 $ 11,941 Federal agencies 237,894 8 972 236,930 Municipals 21,014 336 18 21,332 Mortgage-backed - Government-sponsored entity (GSE) - residential 60,693 254 79 60,868 Total available-for-sale securities $ 331,529 $ 624 $ 1,082 $ 331,071 December 31, 2017 Gross Gross Approximate Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In thousands) Available-for-sale securities: Treasury notes $ 1,000 $ — $ 8 $ 992 Federal agencies 376,414 — 1,683 374,731 Municipals 6,688 — — 6,688 Mortgage-backed - Government-sponsored entity (GSE) - residential 25,960 — — 25,960 Total available-for-sale securities $ 410,062 $ — $ 1,691 $ 408,371 The amortized cost and fair value of available‑for‑sale securities at December 31, 2018 by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. December 31, 2018 Amortized Fair Cost Value Contractual Maturity (In thousands) Within one year $ 179,323 $ 178,581 After one through five years 72,470 72,282 After five through ten years 7,087 7,203 After ten years 11,956 12,137 270,836 270,203 Mortgage-backed - Government-sponsored entity (GSE) - residential 60,693 60,868 $ 331,529 $ 331,071 Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2018 and 2017 was $240.2 million and $375.7 million, respectively, which is approximately 73%, and 92%, respectively, of the Company’s available‑for‑sale investment portfolio. The following tables show the Company’s gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other‑than‑temporarily impaired, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2018, and 2017: December 31, 2018 12 Months or Less than 12 Months Longer Total Gross Gross Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (In thousands) Available-for-sale securities: Treasury notes $ 1,990 $ 8 $ 995 $ 5 $ 2,985 $ 13 Federal agencies 28,296 97 191,280 875 219,576 972 Municipals 2,051 18 — — 2,051 18 Mortgage-backed - Government-sponsored entity (GSE) - residential 15,543 79 — — 15,543 79 $ 47,880 $ 202 $ 192,275 $ 880 $ 240,155 $ 1,082 December 31, 2017 12 Months or Less than 12 Months Longer Total Gross Gross Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (In thousands) Available-for-sale securities: Treasury notes $ 992 $ 8 $ — $ — $ 992 $ 8 Federal agencies 191,064 903 183,667 780 374,731 1,683 $ 192,056 $ 911 $ 183,667 $ 780 $ 375,723 $ 1,691 Unrealized losses on securities have not been recognized to income because the Company has the intent and ability to hold the securities for the foreseeable future, and the decline in fair value is primarily due to increased market interest rates. The fair value is expected to recover as the bonds approach the maturity date. Proceeds from the sale of securities available for sale during the years ended December 31, 2018, 2017 and 2016 were $6.4 million, $0, and $7.4 million, respectively. Gross gains of $0, $0, and $24,000 were realized on 2018, 2017, and 2016 sales, respectively. The carrying value of securities pledged as collateral, to secure borrowings, pubic deposits and for other purposes, was $281.2 million, and $401.7 million at December 31, 2018 and 2017, respectively. |
Loans and Allowance for Loan Lo
Loans and Allowance for Loan Losses | 12 Months Ended |
Dec. 31, 2018 | |
Loans and Allowance for Loan Losses | |
Loans and Allowance for Loan Losses | Note 4: Loans and Allowance for Loan Losses Classes of loans at December 31, 2018 and 2017, include: December 31, December 31, 2018 2017 (In thousands) Mortgage warehouse lines of credit $ 337,332 $ 224,937 Residential real estate 410,871 330,410 Multi-family and healthcare financing 914,393 529,259 Commercial and commercial real estate 299,194 228,668 Agricultural production and real estate 79,255 51,966 Consumer and margin loans 17,082 9,420 2,058,127 1,374,660 Less Allowance for loan losses 12,704 8,311 Loans Receivable $ 2,045,423 $ 1,366,349 Risk characteristics applicable to each segment of the loan portfolio are described as follows. Mortgage Warehouse Lines of Credit (MTG WHLOC): Under its warehouse program, the Company provides warehouse financing arrangements to approved mortgage companies for the origination and sale of residential mortgage loans and to a lesser extent multi‑family loans. Agency eligible, governmental and jumbo residential mortgage loans that are secured by mortgages placed on existing one to four family dwellings may be originated or purchased and placed on each mortgage warehouse line. As a secured line of credit, collateral pledged to the Company secures each individual mortgage until the lender sells the loan in the secondary market. A traditional secured warehouse line of credit typically carries a base interest rate of 30‑day LIBOR, or the Wall Street Journal Prime Rate, plus a margin. Risk is evident if there is a change in the fair value of mortgage loans originated by mortgage bankers during the time in warehouse, which is typically less than 30 days. The sale is the expected source of repayment of the borrowings under a warehouse line of credit. Residential Real Estate Loans (RES RE): The real estate loans are secured by owner‑occupied 1‑4 family residences. Repayment of residential real estate loans is primarily dependent on the personal income and credit rating of the borrowers. Multi‑Family and Healthcare Financing (MF RE): The Company engages in multi‑family and healthcare financing, including construction loans, specializing in originating and servicing loans for multi‑family rental and healthcare properties. In addition, the Company originates loans secured by an assignment of federal income tax credits by partnerships invested in multi‑family real estate projects. Construction and land loans are generally based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from Merchants Bank until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long‑term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economy in the Company and project market area. Repayment of these loans depends on the successful operation of a business or property and the borrower’s cash flows. Commercial Lending and Commercial Real Estate Loans (CML & CRE): The commercial lending and commercial real estate portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions, as well as loans to commercial customers to finance land and improvements. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. Agricultural Production and Real Estate Loans (AG & AGRE): Agricultural production loans are generally comprised of seasonal operating lines of credit to grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. The Company also offers long‑term financing to purchase agricultural real estate. Specific underwriting standards have been established for agricultural‑related loans including the establishment of projections for each operating year based on industry‑developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary. The Company is approved to sell agricultural loans in the secondary market through the Federal Agricultural Mortgage Corporation and uses this relationship to manage interest rate risk within the portfolio. Consumer and Margin Loans (CON & MAR): Consumer loans are those loans secured by household goods. Margin loans are those loans secured by marketable securities. The term and maximum amount for these loans are determined by considering the purpose of the loan, the margin (advance percentage against value) in all collateral, the primary source of repayment, and the borrower’s other related cash flow. The following tables present by loan portfolio segment, the activity in the allowance for loan losses for the years ended December 31, 2018, 2017 and 2016 and the recorded investment in loans and impairment method as of December 31, 2018, 2017 and 2016: At or For the Year Ended December 31, 2018 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Allowance for loan losses Balance, beginning of period $ 283 $ 1,587 $ 3,502 $ 2,362 $ 320 $ 257 $ 8,311 Provision for loan losses 785 399 2,528 779 109 29 4,629 Loans charged to the allowance — — — (90) — (146) (236) Recoveries of loans previously charged off — — — — — — — Balance, end of period $ 1,068 $ 1,986 $ 6,030 $ 3,051 $ 429 $ 140 $ 12,704 Ending balance: individually evaluated for impairment $ 225 $ — $ — $ 400 $ 20 $ — $ 645 Ending balance: collectively evaluated for impairment $ 843 $ 1,986 $ 6,030 $ 2,651 $ 409 $ 140 $ 12,059 Loans Ending balance $ 337,332 $ 410,871 $ 914,393 $ 299,194 $ 79,255 $ 17,082 $ 2,058,127 Ending balance individually evaluated for impairment $ 575 $ 1,606 $ — $ 8,576 $ 370 $ 58 $ 11,185 Ending balance collectively evaluated for impairment $ 336,757 $ 409,265 $ 914,393 $ 290,618 $ 78,885 $ 17,024 $ 2,046,942 At or For the Year Ended December 31, 2017 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Allowance for loan losses Balance, beginning of period $ 373 $ 2,170 $ 1,962 $ 1,374 $ 269 $ 102 $ 6,250 Provision (credit) for loan losses (90) (583) 1,540 1,399 51 155 2,472 Loans charged to the allowance — — — (546) — — (546) Recoveries of loans previously charged off — — — 135 — — 135 Balance, end of period $ 283 $ 1,587 $ 3,502 $ 2,362 $ 320 $ 257 $ 8,311 Ending balance: individually evaluated for impairment $ — $ — $ — $ 200 $ 16 $ 146 $ 362 Ending balance: collectively evaluated for impairment $ 283 $ 1,587 $ 3,502 $ 2,162 $ 304 $ 111 $ 7,949 Loans Ending balance $ 224,937 $ 330,410 $ 529,259 $ 228,668 $ 51,966 $ 9,420 $ 1,374,660 Ending balance individually evaluated for impairment $ — $ 729 $ — $ 6,179 $ 282 $ 146 $ 7,336 Ending balance collectively evaluated for impairment $ 224,937 $ 329,681 $ 529,259 222,489 $ 51,684 $ 9,274 $ 1,367,324 For the Year Ended December 31, 2016 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Allowance for loan losses Balance, beginning of year $ 704 $ 2,212 $ 1,308 $ 908 $ 222 $ 68 $ 5,422 Provision for loan losses (331) 90 654 466 47 34 960 Transfer out — (132) — — — — (132) Loans charged to the allowance — — — — — — — Recoveries of loans previously charged off — — — — — — — Balance, end of year $ 373 $ 2,170 1,962 $ 1,374 $ 269 $ 102 $ 6,250 Internal Risk Categories In adherence with policy, the Company uses the following internal risk grading categories and definitions for loans: Average or above —Loans to borrowers of satisfactory financial strength or better. Earnings performance is consistent with primary and secondary sources of repayment that are well defined and adequate to retire the debt in a timely and orderly fashion. These businesses would generally exhibit satisfactory asset quality and liquidity with moderate leverage, average performance to their peer group and experienced management in key positions. These loans are disclosed as “Acceptable and Above” in the following table. Acceptable —Loans to borrowers involving more than average risk and which contain certain characteristics that require some supervision and attention by the lender. Asset quality is acceptable, but debt capacity is modest and little excess liquidity is available. The borrower may be fully leveraged and unable to sustain major setbacks. Covenants are structured to ensure adequate protection. Borrower’s management may have limited experience and depth. This category includes loans which are highly leveraged due to regulatory constraints, as well as loans involving reasonable exceptions to policy. These loans are disclosed as “Acceptable and Above” in the following table. Special Mention (Watch) —This is a loan that is sound and collectable but contains considerable risk. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard —Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well‑defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful —Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating category and payment activity as of December 31, 2018 and 2017: December 31, 2018 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Special Mention (Watch) $ — $ 443 $ 71,734 $ 14,650 $ 3,096 $ 681 $ 90,604 Substandard 575 1,606 — 8,576 370 58 11,185 Doubtful — — — — — — — Acceptable and Above 336,757 408,822 842,659 275,968 75,789 16,343 1,956,338 Total $ 337,332 $ 410,871 $ 914,393 $ 299,194 $ 79,255 $ 17,082 $ 2,058,127 December 31, 2017 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Special Mention (Watch) $ — $ — $ 1,800 $ 12,608 $ 323 $ 1,563 $ 16,294 Substandard — 729 — 6,179 282 146 7,336 Doubtful — — — — — — — Acceptable and Above 224,937 329,681 527,459 209,881 51,361 7,711 1,351,030 Total $ 224,937 $ 330,410 $ 529,259 $ 228,668 $ 51,966 $ 9,420 $ 1,374,660 The Company evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the past year. The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of December 31, 2018 and 2017: December 31, 2018 30-59 Days 60-89 Days Greater Than Total Total Past Due Past Due 90 Days Past Due Current Loans (In thousands) MTG WHLOC $ — $ — $ 324 $ 324 $ 337,008 $ 337,332 RES RE 579 178 825 1,582 409,289 410,871 MF RE — — — — 914,393 914,393 CML & CRE 245 52 253 550 298,644 299,194 AG & AGRE 91 — 588 679 78,576 79,255 CON & MAR 2 52 28 82 17,000 17,082 $ 917 $ 282 $ 2,018 $ 3,217 $ 2,054,910 $ 2,058,127 December 31, 2017 30-59 Days 60-89 Days Greater Than Total Total Past Due Past Due 90 Days Past Due Current Loans (In thousands) MTG WHLOC $ — $ — $ — $ — $ 224,937 $ 224,937 RES RE — 194 534 728 329,682 330,410 MF RE — — — — 529,259 529,259 CML & CRE — 860 2,061 2,921 225,747 228,668 AG & AGRE 59 — 399 458 51,508 51,966 CON & MAR — — 146 146 9,274 9,420 $ 59 $ 1,054 $ 3,140 $ 4,253 $ 1,370,407 $ 1,374,660 A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310‑10‑35‑16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings. The following tables present impaired loans and specific valuation allowance information based on class level as of December 31, 2018 and 2017: December 31, 2018 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Impaired loans without a specific allowance: Recorded investment $ 251 $ 1,606 $ — $ 5,636 $ 88 $ 58 $ 7,639 Unpaid principal balance 251 1,606 — 5,636 88 58 7,639 Impaired loans with a specific allowance: Recorded investment 324 — — 2,940 282 — 3,546 Unpaid principal balance 324 — — 2,940 282 — 3,546 Specific allowance 225 — — 400 20 — 645 Total impaired loans: Recorded investment 575 1,606 — 8,576 370 58 11,185 Unpaid principal balance 575 1,606 — 8,576 370 58 11,185 Specific allowance 225 — — 400 20 — 645 December 31, 2017 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Impaired loans without a specific allowance: Recorded investment $ — $ 729 $ — $ 4,119 $ — $ — $ 4,848 Unpaid principal balance — 729 — 4,119 — — 4,848 Impaired loans with a specific allowance: Recorded investment — — — 2,060 282 146 2,488 Unpaid principal balance — — — 2,060 282 146 2,488 Specific allowance — — — 200 16 146 362 Total impaired loans: Recorded investment — 729 — 6,179 282 146 7,336 Unpaid principal balance — 729 — 6,179 282 146 7,336 Specific allowance — — — 200 16 146 362 The following tables present by portfolio class, information related to the average recorded investment and interest income recognized on impaired loans for the years ended December 31, 2018, 2017and 2016: December 31, 2018 MTG CML & AG & CON & WHLOC RES RE MF RE CRE AGRE MAR TOTAL (In thousands) Average recorded investment in impaired loans $ 932 $ 1,485 $ — $ 8,872 $ 489 $ 52 $ 11,830 Interest income recognized 59 50 — 375 43 1 528 December 31, 2017 MTG WHLOC RES RE MF CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Average recorded investment in impaired loans $ — $ 156 $ — $ 3,703 $ 282 $ 197 $ 4,338 Interest income recognized — 1 — 182 — — 183 December 31, 2016 MTG CML & AG & CON & WHLOC RES RE MF RE CRE AGRE MAR TOTAL (In thousands) Average recorded investment in impaired loans $ — $ 155 $ — $ 2,222 $ 17 $ — $ 2,394 Interest income recognized — — — 39 — — 39 The following table presents the Company’s nonaccrual loans and loans past due 90 days or more and still accruing at December 31, 2018 and 2017. December 31, December 31, 2018 2017 Total Loans > Total Loans > 90 Days & 90 Days & Nonaccrual Accruing Nonaccrual Accruing (In thousands) MTG WHLOC $ 575 $ — $ — $ — RES RE 893 74 60 475 MF RE — — — — CML & CRE 136 117 2,060 — AG & AGRE 282 307 282 117 CON & MAR 18 9 146 — $ 1,904 $ 507 $ 2,548 $ 592 During 2018, the Company had one newly classified troubled debt restructuring in the CML & CRE loan class. The loan had a pre and post modification balance of $2.0 million. During 2017, the Company had one newly classified troubled debt restructuring to the same borrower in the CML & CRE loan class. This loan also had a pre and post modification balance of $2.0 million. The modifications on both loans included a combination of term and rate concessions which reflect the unlikeliness of the borrower being able to obtain similar financing from another financial institution. There were no new troubled debt restructurings during 2016. For 2018, 2017 and 2016, no troubled debt restructurings modified in the past 12 months subsequently defaulted. There were no residential loans in the process of foreclosure at December 31, 2018 or December 31, 2017. |
Derivative Financial Instrument
Derivative Financial Instruments | 12 Months Ended |
Dec. 31, 2018 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | Note 5: Derivative Financial Instruments The Company uses derivative financial instruments to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities. The Company enters into forward contracts for the future delivery of mortgage loans to third party investors and enters into interest rate lock commitments with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans. Each of these items are considered derivatives, but are not designated as accounting hedges, and are recorded at fair value with changes in fair value reflected in noninterest income on the consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in other assets in the consolidated balance sheets while derivative instruments with a negative fair value are reported in other liabilities in the consolidated balance sheets. The following table presents the notional amount and fair value of interest rate locks and forward contracts utilized by the Company at December 31, 2018. There were no material derivatives recorded at December 31, 2017. Notional Fair Value Amount Balance Sheet Location Asset (Liability) December 31, 2018 (In thousands) (In thousands) Interest rate lock commitments $ 8,812 Derivative assets/liabilities $ 70 $ — Forward contracts 19,640 Derivative assets/liabilities — 9 $ 70 $ 9 Fair values of derivative financial instruments were estimated using changes in mortgage interest rates from the date the Company entered into the interest rate lock commitment and the balance sheet date. The following table summarizes the periodic changes in the fair value of the derivative financial instruments on the consolidated statements of income for the years ended December 31, 2018 and 2017. Year Ended December 31, 2018 2017 (In thousands) Interest rate lock commitments $ 70 $ — Forward contracts (1) (64) — Net derivative gains (losses) 6 $ — _________________________________ (1) Amount includes pair-off settlements. |
Loan Servicing
Loan Servicing | 12 Months Ended |
Dec. 31, 2018 | |
Loan Servicing | |
Loan Servicing | Note 6: Loan Servicing Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets and represent agency eligible multi‑family loans. The risks inherent in mortgage servicing assets relate primarily to changes in prepayments that result from shifts in mortgage interest rates. Call protection is in place to deter from prepayments on a 10‑year sliding scale. The unpaid principal balances of mortgage and other loans serviced for others were $5.8 billion and $5.0 billion at December 31, 2018 and 2017, respectively. Mortgage loans sub‑serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of loans sub‑serviced for others were $3.1 billion and $2.0 billion at December 31, 2018 and 2017, respectively. The following summarizes the activity in mortgage servicing rights measured using the fair value method for the years ended December 31, 2018, 2017, and 2016: For the Year Ended December 31, 2018 2017 2016 (In thousands) Balance, beginning of period $ 66,079 $ 53,670 $ 55,553 Additions Originated and purchased servicing 14,113 10,993 5,745 Acquisition of MCS — 3,970 — Subtractions Paydowns (4,196) (5,504) (4,230) Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model 1,848 2,950 (3,398) Balance, end of period $ 77,844 $ 66,079 $ 53,670 Contractually specified servicing fees for retained, purchased and sub‑serviced loans were $8.7 million, $8.8 million, and $7.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. In connection with certain loan servicing and sub‑servicing agreements, the Company is to reconcile the payments received monthly on these loans, for principal and interest, taxes, insurance, and reserves for replacements. The funds are required to be maintained in separate trust accounts and not commingled with the Company’s general operating funds. At December 31, 2018 and 2017, MCC held restricted escrow funds for these loans, amounting to $412.4 million and $502.7 million, respectively. |
Goodwill and Intangibles
Goodwill and Intangibles | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangibles | |
Goodwill and Intangibles | Note 7: Goodwill and Intangibles Goodwill at December 31, 2018 increased by approximately $13.6 million, compared with December 31, 2017, primarily as a result of the FMBI, FMNBP, and NattyMac, LLC acquisitions on January 2, 2018, October 1, 2018, and December 31,2018, respectively. Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets acquired. Goodwill is tested for impairment as of year‑end, or more frequently if events and circumstances exist that indicate a goodwill impairment test should be performed. Based upon management’s assessment and evaluation of goodwill at year‑end, the likelihood that an impairment of the current carrying amount of goodwill has occurred is considered remote. 2018 2017 2016 Multifamily Banking Warehouse Total Multifamily Banking Warehouse Total Multifamily Banking Warehouse Total (In thousands) (In thousands) (In thousands) Balance, beginning of period $ 3,379 $ 523 $ — $ 3,902 $ — $ 523 $ — $ 523 $ — $ 523 $ — $ 523 Goodwill acquired during the period — 8,163 5,000 13,163 3,379 — — 3,379 — — — — Post-acquisition adjustment 412 — — 412 — — — — — — — — Impairment losses — — — — — — — — — — — — Balance, end of period $ 3,791 $ 8,686 $ 5,000 $ 17,477 $ 3,379 $ 523 $ — $ 3,902 $ — $ 523 $ — $ 523 In conjunction with the acquisition of the assets of NattyMac, LLC on December 31, 2018, the Company recorded goodwill of $5.0 million in the Warehouse segment. No intangible assets were recorded, but further evaluation may result in changes to this assumption. In conjunction with the acquisition of FMNBP on October 1, 2018, the Company recorded goodwill of $7.2 million in the Banking segment as of December 31, 2018. The Company also recorded intangible assets for core deposits, as summarized below. The core deposit intangibles are being amortized over 10 years using the accelerated sum of the years digits method. Amortization for these intangible assets was $85,000 for the year ended December 31, 2018. In conjunction with the acquisition of FMBI on January 2, 2018, the Company recorded goodwill of $988,000 in the Banking segment as of December 31, 2018. The Company also recorded intangible assets for core deposits, as summarized below. The core deposit intangibles are being amortized over 10 years using the accelerated sum of the years digits method. Amortization for these intangible assets was $84,000 for the year ended December 31, 2018. In conjunction with the acquisition of MCS on August 15, 2017, the Company recorded goodwill of $3.4 million in the Multi-family segment. An adjustment of $412,000 was added to goodwill during the year ended December 31, 2018 related to contingent consideration for loans closed after the acquisition date. The Company also recorded intangible assets for licenses and trade names as summarized below. The licenses are being amortized over 84 months and trade names are being amortized over 120 months. Amortization of these intangible assets was $218,000 for the year ended December 31, 2018, $82,000 for the year ended December 31, 2017. 2018 2017 2016 Gross Gross Gross Carrying Accumulated Carrying Accumulated Carrying Accumulated Amount Amortization Total Amount Amortization Total Amount Amortization Total (In thousands) (In thousands) (In thousands) Licenses $ 1,370 $ (269) $ 1,101 $ 1,370 $ (74) $ 1,296 $ — $ — $ — Trade names 224 (31) 193 224 (8) 216 — — — Core deposit intangible 2,417 (169) 2,248 — — — — — — Total intangible Assets $ 4,011 $ (469) $ 3,542 $ 1,594 $ (82) $ 1,512 $ — $ — $ — Estimated amortization expense for future years is as follows (in thousands): Year ending December 31, 2019 $ 639 2020 619 2021 577 2022 521 2023 462 Thereafter 724 Total $ 3,542 |
Premises and Equipment
Premises and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Premises and Equipment | |
Premises and Equipment | Note 8: Premises and Equipment Major classifications of premises and equipment, stated at cost, are as follows: December 31, 2018 2017 (In thousands) Land $ 3,072 $ 2,260 Buildings 4,095 3,140 Building in progress 8,272 407 Leasehold improvements 83 71 Furniture, fixtures and equipment 2,427 2,131 Total cost 17,949 8,009 Accumulated depreciation (2,813) (2,655) Net premises and equipment $ 15,136 $ 5,354 The Company entered into a contract on December 29, 2017 for the construction of a new office building, which is expected to cost approximately $17.9 million and be completed by the summer of 2019. |
Other Assets and Receivables
Other Assets and Receivables | 12 Months Ended |
Dec. 31, 2018 | |
Other Assets and Receivables. | |
Other Assets and Receivables | Note 9: Other Assets and Receivables The following items are included in other assets and receivables in the consolidated balance sheets. Investment in Qualified Affordable Housing Limited Partnerships The Company invests in qualified affordable housing limited partnerships. At December 31, 2018 and 2017, the balance of the investments for qualified affordable housing limited partnerships was $17.2 million and $15.6. million, respectively. The Company expects to contribute an additional $1.1 million related to the partnerships outstanding at December 31, 2018; however, the Company is not obligated to contribute additional capital, as such payments are based on certain development, operational and/or tax credit benchmarks. During the years ended December 31, 2018 and 2017, the Company recorded amortization expense of $1.2 million and $0, respectively. Tax credits related to these investments were $1.5 million for the 2018 tax year and was $0 for the 2017 tax year. The Company expects to receive additional tax credits and other benefits in 2019 and will continue to amortize this investment based on the proportional amortization method. Other items included in other assets and receivables on the balance sheet are not individually significant. |
Deposits
Deposits | 12 Months Ended |
Dec. 31, 2018 | |
Deposits | |
Deposits | Note 10: Deposits Deposits were comprised of the following at and December 31, 2018 and 2017: December 31, 2018 2017 (In thousands) Demand deposits $ 1,548,969 $ 1,279,145 Savings deposits 1,001,663 1,255,460 Certificates of deposit 680,454 408,956 Total deposits $ 3,231,086 $ 2,943,561 At December 31, 2018, the scheduled maturities of time deposits are as follows: December 31, 2018 (In thousands) Due within one year $ 648,173 Due in one year to two years 18,062 Due in two years to three years 9,727 Due in three years to four years 2,964 Due in four years to five years 1,528 $ 680,454 Certificates of deposit of $250,000 or more totaled $46.7 million at December 31, 2018 and $56.8 million at December 31, 2017. Brokered deposit amounts at December 31, 2018 and 2017, were as follows: December 31, 2018 2017 (In thousands) Brokered certificates of deposit $ 578,471 $ 347,000 Brokered savings deposits 109,607 389,475 Brokered deposit on demand accounts 300,134 205,039 $ 988,212 $ 941,514 |
Borrowings
Borrowings | 12 Months Ended |
Dec. 31, 2018 | |
Borrowings | |
Borrowings | Note 11: Borrowings Borrowings were comprised of the following at December 31, 2018 and 2017: December 31, 2018 2017 (In thousands) Lines of credit $ 33,150 $ 25,000 Short-term subordinated debt 10,582 30,000 FHLB advances 151,721 1,612 Total borrowings $ 195,453 $ 56,612 The Company has a revolving line of credit (“LOC”) with a bank for up to $25.0 million with an outstanding balance at both December 31, 2018 and 2017 of $25.0 million. The interest rate on the note is LIBOR Rate plus 1.85%, or 4.2%, at December 31, 2018 and 3.23% at December 31, 2017. The LOC is collateralized by a pledge and first lien security interest in and to all of the issued and outstanding common stock of Merchants Bank of Indiana, the 100% owned subsidiary of the Company. The agreement also requires Merchants Bank to maintain at all times a Tier 1 Leverage Ratio of not less than 8% and is tested on a quarterly basis. The LOC was amended effective June 1, 2018, which extended the maturity date to May 31, 2019. The Company also has a LOC with the Federal Home Loan Bank. This arrangement has a maximum borrowing limit of collateral pledged, with an outstanding balance at both December 31, 2018 and 2017 of $8.2 million and $0, respectively. The floating interest rate on the LOC is set daily at a fixed spread to the actual Federal Funds rate earned by the FHLB, or 2.61% at December 31, 2018. The LOC is automatically renewed daily, unless either party notifies the other of its desire not to continue the arrangement. FHLB advances and the line of credit are secured by mortgage loans totaling $88.1 million and $74.4 million at, December 31, 2018 and 2017, respectively. In addition, available for sale securities and securities purchased under agreements to resell with a carrying value of $269.3 million and $407.7 million were pledged as of December 31, 2018 and 2017, respectively. At December 31, 2018, the FHLB advances had interest rates ranging from 1.79% to 4.74%, and at December 31, 2017, the FHLB advances had interest rates ranging from 2.27% to 4.74%, and were subject to restrictions or penalties in the event of prepayment. The Company entered into an arrangement with Home Point Financial Corporation (a large customer of Merchants Bank) on April 15, 2014 and amended on September 25, 2014. Home Point agreed to invest up to $30.0 million in the Company’s subordinated debt. The Company, in turn, agreed to form and fund NMF, a wholly owned subsidiary of Merchants Bank, and Merchants Bank pledged 100% of the shares of NMF stock to Home Point in consideration for their investment in the Company’s subordinated debt, with the shares serving as the sole collateral for such debt. The subordinated debt balance as of both December 31, 2018 and December 31, 2017 was $0 and $30.0 million, respectively. Interest on the debt was paid quarterly at a rate equal to one‑month LIBOR, plus 350 basis points, plus additional interest equal to 49% of the earnings of NMF. The Company fully repaid the debt and terminated the agreement prior to purchasing the assets of NattyMac, LLC on December 31, 2018. The Company also entered into another warehouse financing arrangement with another customer in April 24, 2018, similar to the revolving arrangement with Home Point Financial described above, whereby the customer agreed to invest up to $30 million in the Company’s subordinated debt. The subordinated debt balance as of December 31, 2018 was $10.6 million. Interest on the debt is paid quarterly by the Company at a rate equal to one-month LIBOR, plus 350 basis points, plus additional interest equal to 50% of the earnings generated. The agreement is automatically renewed annually on April 24 th , unless either party notifies the other party at least 180 days prior to its renewable date, of its desire not to continue the relationship. Maturities of FHLB advances were as follows December 31, 2018: December 31, 2018 (In thousands) Due within one year $ 149,304 Due in one year to two years 590 Due in two years to three years 77 Due in three years to four years 59 Due in four years to five years 342 Thereafter 1,349 $ 151,721 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | Note 12: Income Taxes On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act, which significantly changes the existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%. As a result of enactment of the legislation, the Company recorded in the fourth quarter of 2017, an additional one-time income tax benefit of $6.9 million, primarily related to the re-measurement of certain deferred tax assets and liabilities and included an expense of $243,000 related to the adjustment of the deferred tax asset for net unrealized losses on available for sale securities. The provision for income taxes includes these components for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, 2018 2017 2016 (In thousands) Income tax expense Current tax payable Federal $ 13,312 $ 21,413 $ 18,627 State 5,528 3,479 4,477 Deferred tax payable Federal 1,583 (2,627) (441) State 730 212 (995) Income tax expense $ 21,153 $ 22,477 $ 21,668 Effective tax rate 25.2 % 29.1 % 39.5 % A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense for the years ended December 31, 2018, 2017 and 2016, is shown below: Year Ended December 31, 2018 2017 2016 (In thousands) Computed at the statutory rate (21% for 2018 and 35% for 2017 and 2016) $ 17,646 $ 27,006 $ 19,178 Increase resulting from State income taxes 4,944 2,399 2,264 Effect of Tax Cuts and Jobs Act — (6,928) — Low income housing tax credits (1,533) — — Other 96 — 226 Actual tax expense $ 21,153 $ 22,477 $ 21,668 The tax effects of temporary differences related to deferred taxes shown on the balance sheet were: December 31, 2018 2017 (In thousands) Deferred tax assets Allowance for loan losses $ 3,366 $ 2,216 Unrealized loss on available-for-sale securities 148 442 Other 854 1,548 Total assets 4,368 4,206 Deferred tax liabilities Depreciation (466) (147) Intangible assets (618) — Mortgage-servicing rights (17,477) (15,548) Limited partnership investments (2,212) (1,446) Fair value adjustments on acquisitions (3) — Total liabilities (20,776) (17,141) Net deferred tax liability $ (16,408) $ (12,935) As of December 31, 2018, the Company had approximately $800,000 of federal operating loss carryforwards available to offset future taxable income with no expiration date. The net operating losses were acquired from FMBI and FMNBP. |
Regulatory Matters
Regulatory Matters | 12 Months Ended |
Dec. 31, 2018 | |
Regulatory Matters | |
Regulatory Matters | Note 13: Regulatory Matters The Company, Merchants Bank, and FMBI are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by federal and state banking regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company, Merchants Bank and FMBI must meet specific capital guidelines that involve quantitative measures of the Company’s, Merchants Bank’s, and FMBI’s assets, liabilities and certain off‑balance‑sheet items as calculated under regulatory accounting practices. The Company’s, Merchants Bank’s, and FMBI’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company’s, Merchants Bank’s, and FMBI’s regulators could require adjustments to regulatory capital not reflected in these financial statements. Quantitative measures established by regulation to ensure capital adequacy require the Company, Merchants Bank, and FMBI to maintain minimum amounts and ratios (set forth in the table below). Management believes, as of December 31, 2018 and 2017, that the Company, Merchants Bank, and FMBI met all capital adequacy requirements to which they were subject. As of December 31, 2018, the most recent notifications from the Federal Reserve Board, the FDIC, and IDFPR categorized the Company, Merchants Bank, and FMBI as well capitalized under the regulatory framework for prompt corrective action, respectively. To be categorized as well capitalized, the Company, Merchants Bank, and FMBI must maintain minimum total risk‑based, Tier I risk‑based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Company’s, Merchants Bank’s or FMBI’s category. The Company’s, Merchants Bank’s, and FMBI’s actual capital amounts and ratios are also presented in the following tables. Minimum Amount Required for Minimum Amount Adequately To Be Well Actual Capitalized (1) Capitalized (1) Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2018 Total capital (1) (to risk-weighted assets) Company $ 393,654 12.3 % $ 255,884 8.0 % $ — N/A Merchants Bank 412,386 13.3 % 248,290 8.0 % 310,363 10.0 % FMBI 17,537 18.6 % 7,559 8.0 % 9,448 10.0 % Tier 1 capital (1) (to risk-weighted assets) Company 380,950 11.9 % 191,913 6.0 % — N/A Merchants Bank 399,815 12.9 % 186,218 6.0 % 248,290 8.0 % FMBI 17,404 18.4 % 5,669 6.0 % 7,559 8.0 % Common Equity Tier 1 capital (1) (to risk-weighted assets) Company 339,369 10.6 % 143,935 4.5 % — N/A Merchants Bank 399,815 12.9 % 139,663 4.5 % 201,736 6.5 % FMBI 17,404 18.4 % 4,252 4.5 % 6,141 6.5 % Tier 1 capital (1) (to average assets) Company 380,950 10.0 % 152,081 4.0 % — N/A Merchants Bank 399,815 11.0 % 145,723 4.0 % 182,154 5.0 % FMBI 17,404 10.8 % 6,453 4.0 % 8,066 5.0 % (1) As defined by regulatory agencies. Minimum Minimum Amount Required Amount To Be for Adequately Well Actual Capitalized (1) Capitalized (1) Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2017 Total capital (1) (to risk-weighted assets) Company $ 355,722 13.7 % $ 207,657 8.0 % $ — N/A Merchants Bank 406,638 15.7 % 207,567 8.0 % 259,459 10.0 % Tier I capital (1) (to risk-weighted assets) Company 347,411 13.4 % 155,743 6.0 % — N/A Merchants Bank 398,327 15.4 % 155,675 6.0 % 207,567 8.0 % Common Equity Tier I capital (1) (to risk-weighted assets) Company 305,830 11.8 % 116,807 4.5 % — N/A Merchants Bank 398,327 15.4 % 116,756 4.5 % 168,648 6.5 % Tier I capital (1) (to average assets) Company 347,411 10.9 % 127,318 4.0 % — N/A Merchants Bank 398,327 12.5 % 127,593 4.0 % 159,491 5.0 % (1) As defined by regulatory agencies. Beginning January 1, 2015, the Basel III Capital Rules applied to Merchants Bank. The following table lists the capital categories and ratios determined by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. Common Equity Total Risk-based Tier 1 Risk-based Tier 1 Risk-based Tier 1 Capital Category Capital ratio Capital ratio Capital ratio Leverage ratio Well capitalized 10 % 8 % 6.5 % 5 % Adequately capitalized 8 6 4.5 4 Undercapitalized <8 <6 <4.5 <4 Significantly undercapitalized <6 <4 <3 <3 Critically undercapitalized Tangible Equity/Total Assets </= 2% The Basel III Capital Rules, among other things, (i) include a capital measure called “Common Equity Tier 1” (CET1), (ii) specified that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting specified requirements, (iii) defined CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) expanded the scope of the deductions/adjustments as compared to existing regulations. Under the Basel III Capital Rules, in order to avoid limitations on capital distributions of dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of capital above its minimum risk-based capital requirements. The implementation of the capital conservation buffer began on January 1, 2016, at the 0.625% level and was phased in over a four‑year period (increasing by that amount on each subsequent January 1 until it reached 2.5% on January 1, 2019). The Company’s principal source of funds for dividend payments to shareholders is dividends received from Merchants Bank. Banking regulations limit the maximum amount of dividends that a bank may pay without requesting prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to Merchants Bank’s retained net income (as defined) for the current year plus those for the previous two years, subject to the capital requirements described above. At December 31, 2018, the amount available, without prior regulatory approval, for dividends which could be paid by Merchants Bank to the Company was $101.0 million. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per share | |
Earnings Per share | Note 14: Earnings Per Share Earnings per share were computed as follows for years ended December 31, 2018, 2017 and 2016. Year Ended December 31, 2018 2017 2016 Weighted- Per Weighted- Per Weighted- Per Net Average Share Net Average Share Net Average Share Income Shares Amount Income Shares Amount Income Shares Amount (In thousands) (In thousands) (In thousands) Net income $ 62,874 $ 54,684 $ 33,127 Dividends on preferred stock (3,330) (3,330) (2,002) Net income allocated to common shareholders $ 59,544 $ 51,354 $ 31,125 Basic earnings per share 28,692,955 $ 2.08 22,551,452 $ 2.28 21,111,208 $ 1.47 Effect of dilutive securities—restricted stock awards 31,464 16,702 2,227 Diluted earnings per share 28,724,419 $ 2.07 22,568,154 $ 2.28 21,113,435 $ 1.47 |
Stock Splits
Stock Splits | 12 Months Ended |
Dec. 31, 2018 | |
Stock Splits | |
Stock Splits | Note 15: Stock Splits On July 5, 2017, the Company approved an increase of authorized common shares to 50.0 million shares, and declared a 2.5‑for‑1 stock split effective July 6, 2017. In February 2016, the Company declared a 2‑for‑1 stock split effective March 31, 2016. The presentation of authorized common shares has been retrospectively adjusted to give effect to the increase, and all share and per share amounts have been retrospectively adjusted to give effect to these splits. |
Initial Public Offering of Comm
Initial Public Offering of Common Stock | 12 Months Ended |
Dec. 31, 2018 | |
Initial Public Offering of Common Stock | |
Initial Public Offering of Common Stock | Note 16: Initial Public Offering of Common Stock On October 26, 2017, the Company issued 6,250,000 shares of common stock in its initial public offering, and on November 2, 2017, the Company issued an additional 937,500 shares of common stock to the underwriters related to their exercise of an option to purchase additional shares. The aggregate gross offering proceeds for the shares issued by the Company was $115.0 million, and after deducting underwriting discounts and offering expenses of approximately $8.8 million paid to third parties, the Company received total net proceeds of $106.2 million. |
Private Placement Offering of P
Private Placement Offering of Preferred Stock | 12 Months Ended |
Dec. 31, 2018 | |
Private Placement Offering of Preferred Stock | |
Private Placement Offering of Preferred Stock | Note 17: Private Placement Offering of Preferred Stock During 2016 the Company issued 31,625 shares of non‑cumulative, perpetual preferred stock at $1,000 per share for aggregate gross proceeds of $31.6 million and net proceeds after offering expenses of $31.6 million. During the fourth quarter of 2015, the Company issued 10,000 shares of non‑cumulative, perpetual preferred stock to certain related parties at $1,000 per share for aggregate gross proceeds of $10.0 million. All preferred shares are non‑voting. The preferred shares have an 8% yield and dividends are payable quarterly. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions | |
Related Party Transactions | Note 18: Related Party Transactions The Company has entered into transactions with certain directors, executive officers and their affiliates or associates (related parties). Such transactions were made in the ordinary course of business on substantially the same terms and conditions, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers, and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features. Deposits from related parties held by the Company at December 31, 2018 and 2017 totaled $11.1 million and $4.7 million, respectively. In 2016, the Company purchased a 30% ownership in one of its key loan processing vendors. The investment is accounted for using the equity method of accounting. Fees paid to this Company during the each of the years ended December 31, 2018 and 2017 were $3.4 million and $3.7 million. At December 31, 2018 and 2017, $226,000 and $253,000 was accrued for services received. The Company retained a law firm of which a Board member of Merchants Bank, and previously the Company through July 5, 2017, is a partner. Services rendered are primarily related to documentation of current loan originations, and loan collections from Merchants Bank’s borrowers. Fees paid to the law firm totaled $3.7 million, $3.0 million, and $2.1 million for the years ended December 31, 2018, 2017 and 2016 respectively. On May 8, 2017, the Company entered into a purchase agreement to acquire FMBI (formerly Joy State Bank) from Mr. Petrie, the Chairman/Chief Executive Officer and Mr. Rogers, the President/Chief Operating Officer of the Company. On October 31, 2016, Merchants Bank had entered into an Agreement and Plan of Merger to acquire FMBI. Because the timing and regulatory approval of the transaction was uncertain due to the Company’s capital position at September 30, 2016, the parties agreed that Messrs. Petrie and Rogers, would acquire FMBI. The acquisition of FMBI by the Messrs. Petrie and Rogers closed on April 3, 2017. The purchase agreement provided for Merchants Bank to pay a purchase price equal to approximately $5.4 million plus an approximate cost of funds of $16,000 for each 30 days after June 30, 2017, prorated to the closing date. The purchase price was equal to the price paid by Messrs. Petrie and Rogers, plus expenses and a cost of funds equal to 3.75%. The acquisition closed on January 2, 2018 at a total cost of approximately $5.5 million. At December 31, 2017 FMBI had $43 million in assets and $36.9 million of deposits. |
Employee Benefits
Employee Benefits | 12 Months Ended |
Dec. 31, 2018 | |
Employee Benefits | |
Employee Benefits | Note 19: Employee Benefits Effective January 1, 2016, the Company discontinued its SIMPLE IRA plan and began offering a 401(k) plan. Pursuant to the plan agreement, matching contributions equal to 100% of the employees’ elective deferrals which do not exceed 3% of the employees’ compensation will be made unless management elects to make either the alternative matching contribution or the non‑elective contribution. Employer contributions to the plans were $464,000, $294,000, and $245,000 for the years ended December 31, 2018, 2017, and 2016, respectively. |
Share-Based Payment Plans
Share-Based Payment Plans | 12 Months Ended |
Dec. 31, 2018 | |
Share-Based Payment Plans | |
Share-Based Payment Plans | Note 20: Share‑Based Payment Plan During 2016, the Board of Directors adopted an incentive restricted stock plan for certain executive officers of the Company, (the “2016 Plan”). Annual awards under the 2016 Plan could be earned, subject to certain performance metrics and the participating executive officer may elect annually to receive the plan benefit in the form of Company common shares or a combination of 50% each of common shares and cash. On July 5, 2017, the Company’s shareholders approved and the Company adopted the Merchants Bancorp 2017 Equity Incentive Plan (the “2017 Plan”). During the years ended December 31, 2018 and 2017, the Company issued 7,039 and 3,200 shares, respectively, pursuant to the 2016 Plan. Expense recognized for the Plan totaled $171,000, $458,000, and $57,000 for the years ended December 31, 2018, 2017, and 2016, respectively. At December 31, 2018 and 2017, there were 83,708 and 66,347 unvested shares awarded under the 2016 Plan, respectively. Unrecognized compensation cost totaled $1.1 million and $962,000 at December 31, 2018 and 2017, respectively. During 2018, the Compensation Committee of the Board of Directors approved a plan for non-executive directors to receive a portion of their annual fees in the form of common stock equal to $10,000, rounded up to the nearest whole share. Accordingly, there were 1,830 total shares issued during the year ended December 31, 2018, reflecting $50,000 in expenses. No shares were issued to directors during the year ended December 31, 2017. |
Disclosures about Fair Value of
Disclosures about Fair Value of Assets and Liabilities | 12 Months Ended |
Dec. 31, 2018 | |
Disclosures about Fair Value of Assets and Liabilities | |
Disclosures about Fair Value of Assets and Liabilities | Note 21: Disclosures About Fair Value of Assets and Liabilities Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Level 3 Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities Recurring Measurements The following tables present the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2018 and 2017: Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Fair Assets Inputs Inputs Assets Value (Level 1) (Level 2) (Level 3) (In thousands) December 31, 2018 Trading securities $ 163,419 $ — $ 163,419 $ — Available-for-sale securities: Treasury notes 11,941 11,941 — — Federal agencies 236,930 — 236,930 — Municipals 21,332 — 21,332 — Mortgage-backed - Government-sponsored entity (GSE) - residential 60,868 — 60,868 — Loans held for sale 11,886 — 11,886 — Mortgage servicing rights 77,844 — — 77,844 Derivative assets - interest rate lock commitments 70 — — 70 Derivative liabilities - forward contracts 9 — 9 — December 31, 2017 Trading securities $ 140,837 $ — $ 140,837 $ — Available-for-sale securities: Treasury notes 992 992 — — Federal agencies 374,731 — 374,731 — Municipals 6,688 — — 6,688 Mortgage-backed - Government-sponsored entity (GSE) - residential 25,960 — 25,960 — Mortgage servicing rights 66,079 — — 66,079 Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the years ended December 31, 2018 and 2017. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below. Trading and Available‑for‑Sale Securities Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market‑based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy including federal agencies, mortgage‑backed securities, and FHA participation certificates. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Loans Held for Sale Certain loans held for sale at fair value are saleable into the secondary mortgage markets and their fair values are estimated using observable quoted market or contracted prices, or market price equivalents, which would be used by other market participants. These saleable loans are considered Level 2. Mortgage Servicing Rights Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models having significant inputs of discount rate, prepayment speed, cost to service, and default rate. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy. The Chief Financial Officer’s (CFO) office contracts with a pricing specialist to generate fair value estimates on a quarterly basis. The CFO’s office challenges the reasonableness of the assumptions used and reviews the methodology to ensure the estimated fair value complies with accounting standards generally accepted in the United States. Derivative Financial Instruments The Company estimates the fair value of interest rate lock commitments based on the value of the underlying mortgage loan, quoted mortgage backed security prices, estimates of the fair value of the mortgage servicing rights, and an estimate of the probability that the mortgage loan will fund within the terms of the interest rate lock commitment, net of expenses. The Company estimates the fair value of forward sales commitments based on market quotes of mortgage backed security prices for securities similar to the ones used, which are considered Level 2. With respect to its interest rate lock commitments, management determined that a Level 3 classification was most appropriate based on the various significant unobservable inputs utilized in estimating the fair value of its interest rate lock commitments. Changes in fair value of the Company’s derivative financial instruments are recognized through noninterest income on its consolidated statement of income. Level 3 Reconciliation The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheets using significant unobservable (Level 3) inputs: Year Ended December 31, 2018 2017 2016 (In thousands) Mortgage servicing rights Balance, beginning of period $ 66,079 $ 53,670 $ 55,553 Additions Originated and purchased servicing 14,113 10,993 5,745 Acquisition of MCS — 3,970 — Subtractions Paydowns (4,196) (5,504) (4,230) Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model 1,848 2,950 (3,398) Balance, end of period $ 77,844 $ 66,079 $ 53,670 Available-for-sale securities - Municipals Balance, beginning of period $ 6,688 $ — $ — Additions Purchased securities — 6,688 — Subtractions Paydowns (257) — — Sales (6,431) — — Unrealized gains (losses) included in other comprehensive income — — — Balance, end of period $ — $ 6,688 $ — Derivative Assets - interest rate lock commitments Balance, beginning of period $ — $ — $ — Purchases — — Changes in fair value 70 — Balance, end of period $ 70 $ — $ — Nonrecurring Measurements The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2018 and 2017: Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Fair Assets Inputs Inputs Assets Value (Level 1) (Level 2) (Level 3) (In thousands) December 31, 2018 Impaired loans (collateral-dependent) $ 2,639 $ — $ — $ 2,639 December 31, 2017 Impaired loans (collateral-dependent) $ 2,126 $ — $ — $ 2,126 Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheet, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below. Collateral‑Dependent Impaired Loans, Net of Allowance for Loan Losses The estimated fair value of collateral‑dependent impaired loans is based on the appraised or evaluated fair value of the collateral, less estimated cost to sell. Collateral‑dependent impaired loans are classified within Level 3 of the fair value hierarchy. The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals or evaluations of the collateral underlying collateral‑dependent loans are obtained when the loan is determined to be collateral‑dependent and subsequently as deemed necessary by the Chief Credit Officer’s (CCO) office. Appraisals and evaluations are reviewed for accuracy and consistency by the CCO’s office. Appraisers are selected from the list of approved appraisers maintained by management. The appraised or evaluated values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the CCO’s office by comparison to historical results. Unobservable (Level 3) Inputs: The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill. Valuation Fair Value Technique Unobservable Inputs Range (In thousands) At December 31, 2018: Collateral-dependent impaired loans $ 2,639 Market comparable properties Marketability discount 17%-59% Mortgage servicing rights $ 77,844 Discounted cash flow Discount rate 8% - 13% Constant prepayment rate 1% - 30% Derivative assets - interest rate lock commitments $ 70 Discounted cash flow loan closing rates 95-100% At December 31, 2017: Collateral-dependent impaired loans $ 2,126 Market comparable properties Marketability discount 5% - 47% Mortgage servicing rights $ 66,079 Discounted cash flow Discount rate 8% - 13% Constant prepayment rate 1% - 36% At December 31, 2017, municipal securities of $6.7 million were classified as Level 3, as there was no active market for these or similar securities. These securities were purchased on December 28, 2017, as such, they were valued as of December 31, 2017 at their purchase price. These securities were sold as of December 31, 2018. Sensitivity of Significant Unobservable Inputs The following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring fair value measurement and of how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement. Mortgage Servicing Rights The significant unobservable inputs used in the fair value measurement of the Company’s mortgage servicing rights are discount rates and constant prepayment rates. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement. Fair Value of Financial Instruments The following tables present estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2018 and 2017. Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Carrying Fair Assets Inputs Inputs Assets Value Value (Level 1) (Level 2) (Level 3) (In thousands) December 31, 2018 Financial assets: Cash and cash equivalents $ 336,524 $ 336,524 $ 336,524 $ — $ — Securities purchased under agreements to resell 6,875 6,875 — 6,875 — FHLB stock 7,974 7,974 — 7,974 — Loans held for sale 820,569 820,569 — 820,569 — Loans, net 2,045,423 2,041,772 — — 2,041,772 Interest receivable 13,827 13,827 — 13,827 — Financial liabilities: Deposits 3,231,086 3,230,397 2,550,632 679,765 — Lines of credit 33,150 33,150 — 33,150 — Short-term subordinated debt 10,582 10,582 — 10,582 — FHLB advances 151,721 151,723 — 151,723 — Interest payable 4,132 4,132 — 4,132 — December 31, 2017 Financial assets: Cash and cash equivalents $ 359,519 $ 359,519 $ 359,519 $ — $ — Securities purchased under agreements to resell 7,043 7,043 — 7,043 — FHLB stock 7,539 7,539 — 7,539 — Loans held for sale 995,319 995,319 — 995,319 — Loans, net 1,366,349 1,364,568 — — 1,364,568 Interest receivable 8,326 8,326 — 8,326 — Financial liabilities: Deposits 2,943,561 2,943,173 2,534,605 408,568 — Line of credit 25,000 25,000 — 25,000 — Short-term subordinated debt 30,000 30,000 — 30,000 — FHLB advances 1,612 1,620 — 1,620 — Interest payable 2,817 2,817 — 2,817 — The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheets at amounts other than fair value. Cash and Cash Equivalents and Securities Purchased Under Agreement to Resell The carrying amount approximates fair value. Federal Home Loan Bank Stock The fair value of FHLB stock is based on the price at which it may be sold to the FHLB. Loans Held For Sale The carrying amount approximates fair value due to the insignificant time between origination and date of sale. Loans Fair value is estimated by discounting the future cash flows using the market rates at which similar notes would be made to borrowers with similar credit ratings and for the same remaining maturities. The market rates used are based on current rates the Company would impose for similar loans and reflect a market participant assumption about risks associated with nonperformance, illiquidity, and the structure and term of the loans along with local economic and market conditions. Interest Receivable and Payable The carrying amount approximates fair value. The carrying amount is determined using the interest rate, balance and last payment date. Deposits The fair values of noninterest‑bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. Fair values for fixed‑rate certificates and time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of expected monthly maturities on such time deposits. Lines of Credit and Short‑term Subordinated Debt The carrying amount approximates fair value. Federal Home Loan Bank Advances Fair value is estimated by discounting the future cash flows using rates of similar advances with similar maturities. These rates were obtained from current rates offered by the FHLB. Off‑Balance Sheet Commitments Commitments include commitments to purchase and originate mortgage loans, commitments to sell mortgage loans and standby letters of credit and are generally of a short‑term nature. The fair value of such commitments are based on fees currently charged to similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments to extend credit and letters of credit is not presented in the previous table since the fair value is considered to be insignificant. |
Significant Estimates and Conce
Significant Estimates and Concentrations | 12 Months Ended |
Dec. 31, 2018 | |
Significant Estimates and Concentrations | |
Significant Estimates and Concentrations | Note 22: Significant Estimates and Concentrations Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the provision and allowance for loan losses are reflected in the footnotes regarding loans and the allowance for loan losses (Notes 1 and 4). Estimates related to mortgage servicing rights are reflected in the notes on mortgage servicing rights and loan servicing (Notes 1 and 6). Estimates related to fair values are reflected in the footnote regarding fair values (Note 21). Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnote on commitments, credit risk, and contingencies (Note 23). Other significant estimates and concentrations not discussed in those footnotes include: Mortgage‑backed Securities and Secondary Mortgage Market Programs The Company is involved in government programs for issuing mortgage‑backed securities (MBS). The objective of these programs is to facilitate secondary market activities in order to provide funding for the multi‑family mortgage market. The Company is subject to cancellation of secondary mortgage market programs, rapid increases in general interest rates, and competition associated with conventional mortgage programs. In addition, the Company could be responsible for covering shortfalls in amounts due to investors for delinquencies or foreclosures. No amounts have been reported in the consolidated financial statements since management believes that no near term financial losses will be incurred and these MBS programs will not be significantly affected by the controlling regulatory bodies. Major Customer The Company had no major customers whose business represented more than 10% of revenues during the year ended December 31, 2018. For the years ended December 31, 2017 and 2016 the Company had a major customer of the Mortgage Warehousing segment, whose business represented $14.3 million and $14.7 million, or 10% and 15% of total revenues, respectively. |
Commitments and Credit Risk
Commitments and Credit Risk | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Credit Risk | |
Commitments and Credit Risk | Note 23: Commitments, Credit Risk, and Contingencies In the normal course of business the Company enters into funding commitments with customers who have applied for single and multi‑family residential loans. The customers must meet certain credit and underwriting criteria before the Company is required to fund the loans. The Company entered into commitments to fund loans pending closing of $507.2 million and $221.3 million at December 31, 2018 and 2017, respectively. Closing and funding of the majority of these loans is contingent upon various performance criteria by the potential borrower and the commitment may be rescinded by the Company. The Company enters into a corresponding sales commitment if it is the Company’s intent to close the loan and to sell the loan after closing. The Company, through the Multi-family Mortgage Banking segment, has made commitments to fund construction loans that are drawn upon throughout the construction period. Undisbursed commitments on these loans were $457.8 million and $101.1 million at December 31, 2018 and 2017, respectively. The Company, through the Mortgage Warehousing segment, has line of credit agreements with its non‑depository financial institution customers engaged in mortgage lending. Funds drawn on the lines of credit are used by the borrowers to fund the loans they originate. The customers’ loans must meet certain credit and underwriting criteria before the Company will fund the draw requests on the lines of credit, and the draw requests can be denied by the Company. The outstanding amounts available on these lines of credit totaled $782.4 million and $613.8 million at December 31, 2018 and 2017, respectively. Additionally, in the normal course of business the Company has outstanding unfunded commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying financial statements. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet. Financial instruments, whose contract amount represents credit risk, were as follows at December 31, 2018 and 2017: December 31, 2018 2017 (In thousands) Commitments to extend credit $ 676,987 $ 437,585 Irrevocable standby letters of credit 3,164 26,000 Commitment letters of credit 19,866 31,031 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case‑by‑case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income‑producing commercial properties. Commitment letters of credit are conditional commitments issued by the Company for a fee to guarantee the performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers. The Company’s policy for obtaining collateral and/or guarantees and the nature thereof is generally the same as that involved extending commitments to its customers. The Company has not been required to fund nor has it incurred any losses on any letter of credit commitment during the years ended December 31, 2018 or 2017. The Company has several non-cancellable operating leases, primarily for office space, that expire over the next 1‑7 years. Rental expense for these leases was $1.1 million, $764,000, and $696,000 for the years ended December 31, 2018, 2017 and 2016, respectively. Future minimum lease payments under operating leases as of December 31, 2018 are as follows: December 31, 2018 (In thousands) Due within one year $ 1,021 Due in one year to two years 1,085 Due in two years to three years 736 Due in three years to four years 550 Due in four years to five years 554 Thereafter 426 Total minimum lease payments $ 4,372 The Company and its subsidiaries are parties to various claims and proceedings arising in the normal course of business. Currently, the Company and its subsidiaries are defendants in a litigation matter pending in Indiana state court for breach of contract related to a warehouse credit facility. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such proceedings and claims will not be material to the Company’s consolidated financial position or results of operations. |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2018 | |
Segment Information | |
Segment Information | Note 24: Segment Information The Company’s business segments are defined as Multi‑family Mortgage Banking, Mortgage Warehousing, and Banking. The reportable business segments are consistent with the internal reporting and evaluation of the principal lines of business of the Company. The Multi‑family Mortgage Banking segment originates and services government sponsored mortgages for multi‑family and healthcare facilities. The Mortgage Warehousing segment funds agency eligible residential loans from origination or purchase to sale in the secondary market, as well as commercial loans to non‑depository financial institutions. The Banking segment provides a wide range of financial products and services to consumers and businesses, including commercial, commercial real estate, mortgage and other consumer loan products; letters of credit; various types of deposit products, including checking, savings and time deposit accounts. Other includes general and administrative expenses that provide services to all segments; internal funds transfer pricing offsets resulting from allocations to/from the other segments; certain elimination entries and investments in qualified affordable housing limited partnerships. All operations are domestic. The tables below present selected business segment financial information for the years ended December 31, 2018, 2017 and 2016. Multi-family Mortgage Mortgage Banking Warehousing Banking Other Total (In thousands) Year Ended December 31, 2018 Total interest income $ 712 $ 58,784 $ 79,332 $ 1,735 $ 140,563 Total interest expense — 24,369 29,508 (3,285) 50,592 Net interest income 712 34,415 49,824 5,020 89,971 Provision for loan losses — 1,372 3,257 — 4,629 Net interest income after provision for loan losses 712 33,043 46,567 5,020 85,342 Total noninterest income 45,831 2,550 3,150 (1,946) 49,585 Noninterest expense 19,205 7,721 14,876 9,098 50,900 Income before income taxes 27,338 27,872 34,841 (6,024) 84,027 Income taxes 7,528 6,872 8,572 (1,819) 21,153 Net income $ 19,810 $ 21,000 $ 26,269 $ (4,205) $ 62,874 Total assets $ 166,102 $ 1,430,776 $ 2,256,687 $ 30,598 $ 3,884,163 Multi-family Mortgage Mortgage Banking Warehousing Banking Other Total (In thousands) Year Ended December 31, 2017 Total interest income $ 414 $ 48,798 $ 44,454 $ 721 $ 94,387 Total interest expense — 13,673 14,853 (736) 27,790 Net interest income 414 35,125 29,601 1,457 66,597 Provision for loan losses — 452 2,020 — 2,472 Net interest income after provision for loan losses 414 34,673 27,581 1,457 64,125 Total noninterest income 43,715 2,836 1,943 (814) 47,680 Noninterest expense 10,911 7,710 9,835 6,188 34,644 Income before income taxes 33,218 29,799 19,689 (5,545) 77,161 Income taxes 4,557 11,558 8,279 (1,917) 22,477 Net income $ 28,661 $ 18,241 $ 11,410 $ (3,628) $ 54,684 Total assets $ 134,390 $ 1,352,748 $ 1,889,140 $ 16,855 $ 3,393,133 Multi-family Mortgage Mortgage Banking Warehousing Banking Other Total (In thousands) Year Ended December 31, 2016 Total interest income $ 237 $ 43,352 $ 29,350 $ — $ 72,939 Total interest expense — 11,235 6,546 1,187 18,968 Net interest income 237 32,117 22,804 (1,187) 53,971 Provision for loan losses — (247) 1,207 — 960 Net interest income after provision for loan losses 237 32,364 21,597 (1,187) 53,011 Total noninterest income 22,798 3,220 2,486 — 28,504 Noninterest expense 7,474 7,730 8,383 3,133 26,720 Income before income taxes 15,561 27,854 15,700 (4,320) 54,795 Income taxes 6,153 11,015 6,208 (1,708) 21,668 Net income $ 9,408 $ 16,839 $ 9,492 $ (2,612) $ 33,127 Total assets $ 98,553 $ 1,060,723 $ 1,545,783 $ 13,453 $ 2,718,512 |
Condensed Financial Information
Condensed Financial Information (Parent Company Only) | 12 Months Ended |
Dec. 31, 2018 | |
Condensed Financial Information (Parent Company Only) | |
Condensed Financial Information (Parent Company Only) | Note 25: Condensed Financial Information (Parent Company Only) Presented below is condensed financial information of the Company as to financial position as of December 31, 2018 and 2017, and results of operations and cash flows for the years ended December 31, 2018, 2017 and 2016: Condensed Balance Sheets December 31, 2018 2017 (In thousands) Assets Cash and cash equivalents $ 2,224 $ 7,273 Investment in subsidiaries 453,028 411,528 Other assets 2,104 5,597 Total assets $ 457,356 $ 424,398 Liabilities Lines of credit $ 25,000 $ 25,000 Short-term subordinated debt 10,582 30,000 Other liabilities 537 1,924 Total liabilities 36,119 56,924 Shareholders’ Equity 421,237 367,474 Total liabilities and shareholders’ equity $ 457,356 $ 424,398 Condensed Statements of Income and Comprehensive Income Year Ended December 31, 2018 2017 2016 (In thousands) Income Dividends and return of capital from subsidiaries 37,816 13,632 16,223 Other Income 195 208 196 Total income 38,011 13,840 16,419 Expenses Interest expense 8,055 7,603 7,237 Salaries and employee benefits 1,216 1,617 77 Professional fees 707 341 138 Other 420 251 33 Total expense 10,398 9,812 7,485 Income Before Income Tax and Equity in Undistributed Income of Subsidiaries 27,613 4,028 8,934 Income Tax Benefit (2,542) (3,670) (2,885) Income Before Equity in Undistributed Income of Subsidiaries 30,155 7,698 11,819 Equity in Undistributed Income of Subsidiaries 32,719 46,986 21,308 Net Income $ 62,874 $ 54,684 $ 33,127 Comprehensive Income $ 63,813 $ 54,306 $ 32,731 Condensed Statements of Cash Flows Year Ended December 31, 2018 2017 2016 (In thousands) Operating Activities Net income $ 62,874 $ 54,684 $ 33,127 Adjustments to reconcile net income to net cash used in operating activities (30,522) (44,185) (26,561) Net cash provided by operating activities 32,352 10,499 6,566 Investing Activities Return of capital from/(contributed capital to) subsidiaries 19,368 (101,868) (31,625) Net cash paid for acquisitions (27,209) — — Other investing activity 74 189 (295) Net cash used in investing activities (7,767) (101,679) (31,920) Financing Activities Net change in short-term subordinated debt (19,418) — — Dividends paid (10,216) (7,950) (6,224) Proceeds from issuance of common stock — 106,245 — Proceeds from issuance of preferred stock — — 31,581 Net cash provided by (used in) financing activities (29,634) 98,295 25,357 Net Change in Cash and Due From Banks (5,049) 7,115 3 Cash and Due From Banks at Beginning of Year 7,273 158 155 Cash and Due From Banks at End of Year $ 2,224 $ 7,273 158 |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 12 Months Ended |
Dec. 31, 2018 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | Note 26: Recent Accounting Pronouncements The Company is an emerging growth company and as such will be subject to the effective dates noted for the private companies if they differ from the effective dates noted for public companies. FASB ASU 2014‑09, Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014‑09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016 the FASB issued ASU 2016‑08, “Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” which clarifies the guidance in determining revenue recognition as principal versus agent. In April 2016, the FASB issued ASU 2016‑10, “Identifying Performance Obligations and Licensing,” which provides guidance in accounting for immaterial performance obligations and shipping and handling. In May 2016, the FASB issued ASU 2016‑12, “Narrow‑Scope Improvements and Practical Expedients,” which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for noncash consideration and completed contracts at transition. This ASU also provides a practical expedient for contract modifications. As an emerging growth company, these amendments are effective for annual reporting periods beginning after December 15, 2018, and for interim periods within annual periods beginning after December 15, 2019. The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09. The Company has evaluated the impact of adopting ASU 2014-09, but does not expect the impact to have a material impact on the Company’s financial position or results of operations. FASB ASU 2016‑01, Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued ASU 2016‑01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” For public business entities, the amendments in this update include the elimination of the requirement to disclose the method(s) and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, the requirement to use the exit price notion when measuring fair value of financial instruments for disclosure purposes, the requirement to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument‑specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, the requirement for separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or accompanying notes to the financial statements, and the amendments clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available‑for‑sale securities in combination with the entity’s other deferred tax assets. An entity should apply the amendments to this update by means of a cumulative‑effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. As an emerging growth company, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within years beginning after December 15, 2019. Early adoption of the amendments in the update is not permitted, except that early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance, are permitted as of the beginning of the fiscal year of adoption for the following amendment: An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability at fair value in accordance with the fair value option for financial instruments. An entity should apply the amendments to this update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company is continuing to evaluate the impact of adopting this new guidance on its consolidated financial statements, but the adoption of ASU 2016-01 is not expected to have a material impact on the Company’s financial position or results of operation. FASB ASU 2016‑02, Leases In February 2016, the FASB issued ASU 2016‑02, “Leases.” Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short‑term leases) at the commencement date: · A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and · A right‑of‑use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, “Revenue from Contracts with Customers.” The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off‑balance sheet financing. Lessees (for capital and operating leases) and lessors (for sales‑type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The amendments in ASU 2016‑02 are effective, as an emerging growth company, beginning after December 15, 2019, and for interim periods for years beginning after January 1, 2020. Management is in the process of gathering documentation on current lease agreements to assess the impact of adopting this guidance on the Company’s financial statements, but its impact is not expected to be material. FASB ASU 2016‑13, Financial Instruments—Credit Losses In June 2016, the FASB issued ASU 2016‑13, “Financial Instruments—Credit Losses”. The amendments in this ASU replace the incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. ASU 2016‑13 replaces the incurred loss impairment methodology with a new methodology that reflects expected credit losses over the lives of the loans and requires consideration of a broader range of information to form credit loss estimates. The ASU requires an organization to estimate all expected credit losses for financial assets measured at amortized cost, including loans and held‑to‑maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts. Additional disclosures are required. As an emerging growth company, ASU 2016‑13 is effective, for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years beginning after December 15, 2021. The Company has established a cross-functional committee that is developing a project plan to review modeling data currently available and technology needed to ensure compliance of this standard. The committee has also met with multiple vendors to potentially assist in generating specific loan level details within our core systems, as well as compiling peer and industry data that would be useful in our modeling forecasts. While the Company generally expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, the Company cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the Company’s consolidated financial statements. Management continues to expect that the implementation of this ASU may increase the balance of the allowance for loan losses and is continuing to evaluate the potential impact on the Company’s financial position and results of operations. FASB ASU No. 2017‑04, Intangibles—Goodwill and Other (Topic 350) In January 2017, the FASB issued ASU 2017‑04, “Intangibles—Goodwill and Other (Topic 350).” This ASU simplifies the test for goodwill impairment. Specifically, these amendments eliminate Step 2 from the goodwill impairment test, and also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. As an emerging growth company, the amendments in this ASU are effective for annual goodwill impairment tests in fiscal years beginning after December 15, 2021. Management continues to believe that the changes will not have a material effect on the Company’s financial position and results of operations. FASB ASU 2017‑08, Premium Amortization on Purchased Callable Debt In March 2017, the FASB issued ASU 2017‑08, “Premium Amortization on Purchased Callable Debt.” This ASU applies to all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium). The ASU requires the premium to be amortized to the earliest call date, not the maturity date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. As an emerging growth company, ASU 2017‑08 is effective as to the Company for years beginning after December 15, 2019 and interim periods within years beginning after December 15, 2020. Early adoption is permitted. Management is still in the process of evaluating the impact of adopting this guidance, but does not expect the ASU to have a material effect on the Company’s financial position or results of operations. FASB ASU 2018-02 , Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In February 2018, the FASB issued ASU No. 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendments in this ASU allow a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. The amendments in this ASU also require certain disclosures about stranded tax effects. The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. At December 31, 2017, the Company had approximately $243,000 stranded tax effects included in AOCI. The Company adopted this ASU in the first quarter of 2018. |
Quarterly Condensed Financial I
Quarterly Condensed Financial Information (Unaudited) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Condensed Financial Information (Unaudited) | |
Quarterly Condensed Financial Information (Unaudited) | Note 27: Quarterly Condensed Financial Information (Unaudited) The following tables present the unaudited quarterly condensed financial information for the years ended December 31, 2018 and 2017: 2018 Quarter Ended (Dollars in thousands, except per share data) March 31 June 30 September 30 December 31 Interest income $ 29,038 $ 34,123 $ 37,577 $ 39,825 Interest expense 8,930 11,917 14,095 15,650 Net interest income 20,108 22,206 23,482 24,175 Provision for loan losses 1,406 998 617 1,608 Net interest income after provision for loan losses 18,702 21,208 22,865 22,567 Noninterest income 11,313 11,630 11,907 14,735 Noninterest expense 10,270 12,000 12,449 16,181 Income before income taxes 19,745 20,838 22,323 21,121 Income taxes 4,684 5,186 5,584 5,699 Net income 15,061 15,652 16,739 15,422 Less: preferred stock dividends 833 832 833 832 Net income allocated to common shareholders $ 14,228 $ 14,820 $ 15,906 $ 14,590 Per common share data: Basic earnings per common share $ 0.50 $ 0.52 $ 0.55 $ 0.51 Diluted earnings per common share 0.50 0.52 0.55 0.51 2017 Quarter Ended (Dollars in thousands, except per share data) March 31 June 30 September 30 December 31 Interest income $ 19,007 $ 22,464 $ 26,006 $ 26,910 Interest expense 5,476 6,740 7,616 7,958 Net interest income 13,531 15,724 18,390 18,952 Provision for loan losses 240 240 592 1,400 Net interest income after provision for loan losses 13,291 15,484 17,798 17,552 Noninterest income 8,091 16,626 8,056 14,907 Noninterest expense 6,641 8,261 8,942 10,800 Income before income taxes 14,741 23,849 16,912 21,659 Income taxes 5,611 9,091 6,445 1,330 Net income 9,130 14,758 10,467 20,329 Less: preferred stock dividends 832 832 833 833 Net income allocated to common shareholders $ 8,298 $ 13,926 $ 9,634 $ 19,496 Per common share data: Basic earnings per common share $ 0.39 $ 0.66 $ 0.45 $ 0.73 Diluted earnings per common share 0.39 0.66 0.45 0.73 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events | |
Subsequent Events | Note 28: Subsequent Events No material events were noted. |
Nature of Operations and Summ_2
Nature of Operations and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Operations and Summary of Significant Accounting Policies | |
Nature of Operations and Principles of Consolidation | Nature of Operations and Principles of Consolidation The accompanying consolidated financial statements include the accounts of Merchants Bancorp, a registered bank holding company (the “Company”) and its wholly owned subsidiaries, Merchants Bank of Indiana (“Merchants Bank”) and Farmers-Merchants Bank of Illinois (“FMBI,” formerly Joy State Bank prior to October 22, 2018). Merchants Bank’s direct and indirect subsidiaries include Merchants Capital Corp. (“MCC,” formerly P/R Mortgage and Investment Corp prior to October 1, 2018), Merchants Capital Servicing, LLC (“MCS,” formerly RICHMAC Funding, LLC prior to November 1, 2018), Ash Realty Holdings, LLC (“Ash Realty”), MBI Midtown West, LLC (“MMW”), Natty Mac Funding, Inc. (“NMF”), and OneTrust Funding, Inc. The Company also acquired Farmers-Merchants National Bank of Paxton (‘FMNBP”) on October 1, 2018 through a merger with FMBI, with FMBI as the surviving entity. All these entities are collectively referred to as the “Company”. All significant intercompany accounts and transactions have been eliminated in consolidation. Merchants Bank operates under an Indiana state bank charter and provides full banking services. As a state bank and non-Federal Reserve member, it is subject to the regulation of the Indiana Department of Financial Institutions (“IDFI”) and the Federal Deposit Insurance Corporation (“FDIC”). The Company is further subject to regulations of the Board of Governors of the Federal Reserve System (“Federal Reserve”) governing bank holding companies. Merchants Bank operates from four locations in Indiana, including Lynn, Spartanburg, Carmel and Indianapolis. Merchants Bank generates commercial, mortgage and consumer loans and receives deposits from customers located primarily in Hamilton, Randolph and surrounding counties in Indiana. Merchants Bank’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Merchants Bank’s Mortgage Warehousing segment funds and participates in single family and multi‑family, agency eligible loans across the nation. FMBI operates under an Illinois state bank charter and provides full banking services. As a state bank and non-Federal Reserve member, it is subject to the regulation of the Illinois Department of Financial and Professional Regulation (“IDFPR”) and the FDIC. FMBI operates from five locations in Illinois, including Joy, New Boston, Paxton, Melvin, and Piper City. MCC was formed in August 1990, in the state of Indiana. MCC is primarily engaged in mortgage banking, specializing in lending for multi‑family rental properties and healthcare facilities. It is an FHA approved mortgagee and a Ginnie Mae, Fannie Mae, and Freddie Mac issuer. In August 2012, Merchants Bank established a qualifying subsidiary, Ash Realty, for the purpose of acquiring, holding and liquidating real estate acquired by Merchants Bank as a result of various foreclosures. NMF was formed in April 2014, in the state of Indiana. Prior to the Company acquiring all the assets of NattyMac Funding, LLC from Home Point Financial Corporation (“Home Point”) on December 31, 2018, NMF provided loan participations and participation warehouse financing to Home Point, its subsidiaries, and customers. MMW was formed in 2016 to hold land and improvements for the Company’s new headquarters building that is expected to be complete in the summer of 2019. OneTrust Funding, Inc. was formed in April 2018, in the state of Indiana, to facilitate warehouse financing arrangements, similar to those between NMF and Home Point. |
Recent Acquisitions | Recent Acquisitions On August 15, 2017, Merchants Bank acquired 100% of the equity interests of MCS (formerly RICHMAC Funding, LLC), which was a national multi-family housing mortgage lender and servicer. The purchase price was paid in shares of Company common stock with a value of $8.1 million. As of December 31, 2018, the Company recorded goodwill and intangible assets totaling $3.8 million and $1.6 million, respectively, in connection with the acquisition. As a result of the acquisition, the Company expanded its product offerings and benefited from economies of scale. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. On May 8, 2017, the Company entered into a Stock Purchase Agreement to acquire FMBI (formerly Joy State Bank). The acquisition closed on January 2, 2018 at a total cost of approximately $5.5 million. At December 31, 2017 Joy State Bank had $43 million in assets. The Company recorded goodwill and intangible assets totaling $988,000 and $478,000, respectively, in connection with the acquisition. The intangible assets consisted of core deposit intangibles that are being amortized over 10 years on an accelerated basis. The acquired time deposits of $16.7 million were recorded at a fair value of $16.9 million. The fair value premium of $185,000 is being accreted against interest expense over 20 months. The acquired loan portfolio of $27.9 million was recorded at a fair value of $27.5 million. The fair value discount of $458,000 is being accreted to interest income on a straight-line basis over an average of 39 months in accordance with ASC 310-20. While there were some loans identified for potential classification under ASC 310-30, they were not material to the transaction. On October 22, 2018, the Company changed the name of Joy State Bank to Farmers-Merchants Bank of Illinois (“FMBI”). Certain fair value measurements and the purchase price allocation are still being evaluated by management and are subject to change during the measurement period. As a result of the acquisition, the Company increased its deposit base and benefited from economies of scale. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. On October 1, 2018, the Company acquired FM Bancorp, Inc., a bank holding company, and its wholly owned subsidiary, Farmers-Merchants National Bank of Paxton (“FMNBP”). On that date, FM Bancorp, Inc. ultimately merged with and into the Company, with the Company as the surviving entity, and FMNBP merged with and into Joy State Bank, with Joy State Bank as the surviving bank. Effective October 22, 2018, Joy State Bank’s name changed to Farmers-Merchants Bank of Illinois (“FMBI”). Under the terms of the merger agreement, shareholders of the 27,537 outstanding shares of FM Bancorp, Inc. were compensated $795.29 per share, for a total purchase price of $21.9 million. As of September 30, 2018, FM Bancorp, Inc. and Farmers-Merchants National Bank of Paxton had total assets of approximately $110.0 million, available for sale securities of $66.3 million, deposits of approximately $95.7 million, and net loan receivables of approximately $35.0 million. The Company recorded goodwill and intangible assets totaling $7.2 million and $1.9 million. The intangible assets consisted of core deposit intangibles that are being amortized over 10 years on an accelerated basis. The acquired available for sale securities of $66.3 million were recorded at fair value. A fair value discount associated with securities of $1.0 million is being accreted into interest income, in accordance with ASC 310-20. While there were some loans identified for potential classification under ASC 310-30, they were not material to the transaction. The acquired gross loan portfolio of $35.4 million was recorded at a fair value of $34.8 million. The fair value discount of $625,000 includes a discount related to interest assumptions for $279,000 and to credit assumptions for $346,000. The portion related to interest assumptions is being accreted into interest income on a straight-line basis over an average of 72 months in accordance with ASC 310-20. The discount portion related to credit assumptions is being accreted into interest income over the life of the loan. The acquired deposits of $95.7 million were recorded at a fair value of $95.7 million. Certain fair value measurements and the purchase price allocation are still being evaluated by management and are subject to change during the measurement period. As a result of the acquisition, the Company increased its deposit base and benefited from economies of scale. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. On December 31, 2018, the Company acquired the assets of NattyMac, LLC, a warehouse lender operating out of Clearwater, Florida, from Home Point Financial Corporation (“Home Point”). The Company also fully repaid Home Point the balance of, and all interest owed on, the $30 million subordinated debt it had previously invested in the Company. Goodwill totaling $5.0 million was recorded by the Company. Certain fair value measurements, intangibles, and the purchase price allocation are still being evaluated by management and are subject to change during the measurement period. As a result of the acquisition, the Company expects to increase its geographic footprint in the warehouse business, reduce its costs of borrowing, increase the earnings generated from its warehouse business, and benefit from its experienced talent pool. The acquisition did not materially impact the Company’s financial position, results of operations or cash flows. Given the impact of the acquisitions was immaterial to the Company and its results of operations, pro forma information has not been included. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, loan servicing rights and fair values of financial instruments. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents consist primarily of cash amounts due from depository institutions, interest‑bearing deposits in other banks, money market accounts, and federal funds sold. At December 31, 2018, the Company’s cash accounts exceeded federally insured limits by approximately $331.2 million. Included in this amount is approximately $295.4 million with the Federal Reserve Bank, $12.9 million with the Federal Home Loan Bank of Indianapolis, and $15,000 with the Federal Home Loan Bank of Chicago. At December 31, 2017, the Company’s cash accounts exceeded federally insured limits by approximately $349.4 million. Included in this amount is approximately $327.4 million with the Federal Reserve Bank and $3.5 million with the Federal Home Loan Bank of Indianapolis. |
Securities purchased under agreements to resell | Securities purchased under agreements to resell Securities purchased pursuant to a simultaneous agreement (RRA) to resell the same securities at a specified price and date generally have maturity dates of 90 days or less and are carried at cost. Every 90 days the RRAs rollover. |
Trading Activities | Trading Activities The Company engages in trading activities. Securities that are held principally for resale in the near term are recorded in the trading assets account at fair value with changes in fair value recorded in earnings. Trading securities include FHA and conventional participation certificates. Interest is included in net interest income. |
Securities | Securities Certain debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Securities not classified as held to maturity or trading, including equity securities with readily determinable fair values, are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method. For debt securities with fair value below amortized cost when the Company does not intend to sell a debt security, and it is more likely than not the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other‑than‑temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held‑to‑maturity debt securities, the amount of other‑than‑temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other‑than‑temporary impairment is amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security. |
Loans Held for Sale under Mortgage Banking Activities | Loans Held for Sale under Mortgage Banking Activities The Company uses participation agreements to fund mortgage loans held for sale from closing or purchase until sale to an investor. Under a participation agreement the Company elects to purchase a participation interest of up to 100% in individual loans. The Company shares proportionately in the interest income and the credit risk until the loan is sold to an investor. The Company holds the collateral until it is sent under a bailee arrangement to the investor. Typical investors are large financial institutions or government agencies. These loans are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance and included in noninterest income. Other mortgage loans originated and intended for sale in the secondary market, for which the fair value option has been elected, are carried at fair value at each balance sheet date. The Company believes that the fair value is the best indicator of the resolution of these loans. The difference between the cost and fair value was not material at December 31, 2018. For all loans held for sale, interest earned from the time of funding to the time of sale is accrued and recognized as interest income. Gains and losses on loan sales are recorded in noninterest income, and generally direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan. The gain on sale of loans in the income statement may include placement and origination fees, capitalized mortgage servicing rights, trading gains and losses and other related income . |
Loans | Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for unearned income, charge‑offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. For loans amortized at cost, interest income is accrued based on the unpaid principal balance. The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well‑secured and in process of collection. Past‑due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. For loans that are placed on nonaccrual or that are charged off, all accrued interest is reversed against interest income. The interest on these loans is applied to the principal balance until the loan can be returned to an accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. For all loan portfolio segments, the Company promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectable based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge‑off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral. When cash payments are received on impaired loans in each loan class, the Company records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms. The Company uses warehouse loans or credit to fund mortgage loans held for sale from closing until sale to an investor. Under a warehousing arrangement the Company funds a mortgage loan as secured financing. The warehousing arrangement is secured by the underlying mortgages and a combination of deposits, personal guarantees and advance rates. The Company holds the collateral until it is sent under a bailee arrangement instructing the investor to send proceeds to the Company. Typical investors are large financial institutions or government agencies. Interest earned from the time of funding to the time of sale is recognized as interest income as accrued. Fees earned agreements are recognized when collected as noninterest income. |
Allowance for Loan Losses | Allowance for Loan Losses The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non‑classified loans and is based on historical charge‑off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case‑by‑case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan‑by‑loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Company utilizes discounted cash flows to determine the level of impairment, the Company includes the entire change in the present value of cash flows as bad debt expense. Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower. In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Company attempts to work out an alternative payment schedule with the borrower in order to optimize collectability of the loan. A troubled debt restructuring (TDR) occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. Nonaccrual loans, including TDRs that have not met the six-month minimum performance criterion, are reported as nonperforming loans. For all loan classes, it is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being restructured remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider its return to accrual status. A loan is generally classified as nonaccrual when the Company believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due. With regard to determination of the amount of the allowance for credit losses, restructured loans are considered to be impaired. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above. |
Premises and Equipment | Premises and Equipment Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight‑line method over the estimated useful lives of the assets. The estimated useful lives for premises and equipment are as follows: Buildings 10 to 40 years Leasehold improvements 5 to 39 years Furniture, fixtures and equipment 3 to 10 years Vehicles 5 years Expenditures for property and equipment and for renewals or betterments that extend the originally estimated economic life of the assets are capitalized. Expenditures for maintenance and repairs are charged to expense. When an asset is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations. |
Federal Home Loan Bank Stock | Federal Home Loan Bank Stock Federal Home Loan Bank (FHLB) stock is a required investment for institutions that are members of a FHLB. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment. |
Other Real Estate Owned | Other Real Estate Owned Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from other real estate. |
Mortgage Servicing Rights | Mortgage Servicing Rights Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860‑50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company has elected to initially and subsequently measure the mortgage servicing rights for mortgage loans using the fair value method. Under the fair value method, the servicing rights are carried in the balance sheet at fair value and the changes in fair value are reported in earnings in the period in which the changes occur. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model is from an independent third party and it incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds, prepayment penalties, and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage‑servicing right and may result in a reduction to noninterest income. Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The change in the fair value of the mortgage‑servicing rights is netted against loan servicing fee income. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill is tested annually for impairment or more frequently if impairment indicators are present. If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the financial statements. Intangible assets, which include licenses and trade names, are amortized over a period ranging from 84 to 120 months using a straight line method of amortization. Also included are core deposit intangibles that are amortized over a 10 year period using the accelerated sum of the years digits method of amortization. On a periodic basis, the Company evaluates events and circumstances that may indicate a change in the recoverability of the carrying value. |
Investment in Qualified Affordable Housing Limited Partnerships | Investment in Qualified Affordable Housing Limited Partnerships The Company has elected to account for its investment in affordable housing tax credit limited partnerships using the proportional amortization method described in FASB ASU 2014‑01, “Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (A Consensus of the FASB Emerging Issues Task Force).” Under the proportional amortization method, an investor amortizes the initial cost of the investment to income tax expense in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. The investment in the limited partnerships is included in other assets in the consolidated balance sheets. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes ). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more‑likely‑than‑not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more‑likely‑than‑not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. With a few exceptions, the Company is no longer subject to U.S. federal, state and local or non‑U.S. income tax examinations by tax authorities for years before 2015. The Company recognizes interest and penalties, if any, on income taxes as a component of income tax expense. The Company files consolidated income tax returns with its subsidiaries. |
Earnings Per Share | Earnings Per Share Basic earnings per share is the Company’s net income available to common shareholders, which represents net income less dividends paid or payable to preferred stock shareholders, if any, divided by the weighted‑average number of common shares outstanding during each period. Diluted earnings per share is calculated in the same manner as basic earnings per share, but also reflects the issuance of additional common shares that would have been diluted if such shares had been outstanding, as well as any adjustment to income that would result from the assumed issuance. |
Share based Compensation Plan | Share‑based Compensation Plan The Company has a restricted stock plan that provides for annual awards of shares to certain members of senior management based upon the Company’s performance and attainment of certain performance goals established by the Board of Directors. Share awards are valued at the estimated fair value on the date of the award and generally vest over three years. Compensation expense for the awards is recognized in the consolidated financial statements ratably over the vesting period. |
Comprehensive Income | Comprehensive Income Comprehensive income consists of net income and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) and accumulated other comprehensive income consist entirely of unrealized appreciation (depreciation) on available‑for‑sale investment securities. |
Reclassifications | Reclassifications Certain reclassifications have been made to the 2017 and 2016 financial statements to conform to the financial statement presentation as of and for the year ended December 31, 2018. These reclassifications had no effect on net income. |
Nature of Operations and Summ_3
Nature of Operations and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Operations and Summary of Significant Accounting Policies | |
Schedule of estimated useful lives | Buildings 10 to 40 years Leasehold improvements 5 to 39 years Furniture, fixtures and equipment 3 to 10 years Vehicles 5 years |
Securities (Tables)
Securities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Securities | |
Schedule of amortized cost and approximate fair values, together with gross unrealized gains and losses | December 31, 2018 Gross Gross Approximate Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In thousands) Available-for-sale securities: Treasury notes $ 11,928 $ 26 $ 13 $ 11,941 Federal agencies 237,894 8 972 236,930 Municipals 21,014 336 18 21,332 Mortgage-backed - Government-sponsored entity (GSE) - residential 60,693 254 79 60,868 Total available-for-sale securities $ 331,529 $ 624 $ 1,082 $ 331,071 December 31, 2017 Gross Gross Approximate Amortized Unrealized Unrealized Fair Cost Gains Losses Value (In thousands) Available-for-sale securities: Treasury notes $ 1,000 $ — $ 8 $ 992 Federal agencies 376,414 — 1,683 374,731 Municipals 6,688 — — 6,688 Mortgage-backed - Government-sponsored entity (GSE) - residential 25,960 — — 25,960 Total available-for-sale securities $ 410,062 $ — $ 1,691 $ 408,371 |
Schedule of amortized cost and fair value of available-for-sale securities by contractual maturity | December 31, 2018 Amortized Fair Cost Value Contractual Maturity (In thousands) Within one year $ 179,323 $ 178,581 After one through five years 72,470 72,282 After five through ten years 7,087 7,203 After ten years 11,956 12,137 270,836 270,203 Mortgage-backed - Government-sponsored entity (GSE) - residential 60,693 60,868 $ 331,529 $ 331,071 |
Schedule of gross unrealized losses and fair value of investments with unrealized losses have been in continuous | December 31, 2018 12 Months or Less than 12 Months Longer Total Gross Gross Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (In thousands) Available-for-sale securities: Treasury notes $ 1,990 $ 8 $ 995 $ 5 $ 2,985 $ 13 Federal agencies 28,296 97 191,280 875 219,576 972 Municipals 2,051 18 — — 2,051 18 Mortgage-backed - Government-sponsored entity (GSE) - residential 15,543 79 — — 15,543 79 $ 47,880 $ 202 $ 192,275 $ 880 $ 240,155 $ 1,082 December 31, 2017 12 Months or Less than 12 Months Longer Total Gross Gross Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (In thousands) Available-for-sale securities: Treasury notes $ 992 $ 8 $ — $ — $ 992 $ 8 Federal agencies 191,064 903 183,667 780 374,731 1,683 $ 192,056 $ 911 $ 183,667 $ 780 $ 375,723 $ 1,691 |
Loans and Allowance for Loan _2
Loans and Allowance for Loan Losses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Loans and Allowance for Loan Losses | |
Summary of loans | December 31, December 31, 2018 2017 (In thousands) Mortgage warehouse lines of credit $ 337,332 $ 224,937 Residential real estate 410,871 330,410 Multi-family and healthcare financing 914,393 529,259 Commercial and commercial real estate 299,194 228,668 Agricultural production and real estate 79,255 51,966 Consumer and margin loans 17,082 9,420 2,058,127 1,374,660 Less Allowance for loan losses 12,704 8,311 Loans Receivable $ 2,045,423 $ 1,366,349 |
Summary of activity in the allowance for loans and recorded investment by loan portfolio | At or For the Year Ended December 31, 2018 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Allowance for loan losses Balance, beginning of period $ 283 $ 1,587 $ 3,502 $ 2,362 $ 320 $ 257 $ 8,311 Provision for loan losses 785 399 2,528 779 109 29 4,629 Loans charged to the allowance — — — (90) — (146) (236) Recoveries of loans previously charged off — — — — — — — Balance, end of period $ 1,068 $ 1,986 $ 6,030 $ 3,051 $ 429 $ 140 $ 12,704 Ending balance: individually evaluated for impairment $ 225 $ — $ — $ 400 $ 20 $ — $ 645 Ending balance: collectively evaluated for impairment $ 843 $ 1,986 $ 6,030 $ 2,651 $ 409 $ 140 $ 12,059 Loans Ending balance $ 337,332 $ 410,871 $ 914,393 $ 299,194 $ 79,255 $ 17,082 $ 2,058,127 Ending balance individually evaluated for impairment $ 575 $ 1,606 $ — $ 8,576 $ 370 $ 58 $ 11,185 Ending balance collectively evaluated for impairment $ 336,757 $ 409,265 $ 914,393 $ 290,618 $ 78,885 $ 17,024 $ 2,046,942 At or For the Year Ended December 31, 2017 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Allowance for loan losses Balance, beginning of period $ 373 $ 2,170 $ 1,962 $ 1,374 $ 269 $ 102 $ 6,250 Provision (credit) for loan losses (90) (583) 1,540 1,399 51 155 2,472 Loans charged to the allowance — — — (546) — — (546) Recoveries of loans previously charged off — — — 135 — — 135 Balance, end of period $ 283 $ 1,587 $ 3,502 $ 2,362 $ 320 $ 257 $ 8,311 Ending balance: individually evaluated for impairment $ — $ — $ — $ 200 $ 16 $ 146 $ 362 Ending balance: collectively evaluated for impairment $ 283 $ 1,587 $ 3,502 $ 2,162 $ 304 $ 111 $ 7,949 Loans Ending balance $ 224,937 $ 330,410 $ 529,259 $ 228,668 $ 51,966 $ 9,420 $ 1,374,660 Ending balance individually evaluated for impairment $ — $ 729 $ — $ 6,179 $ 282 $ 146 $ 7,336 Ending balance collectively evaluated for impairment $ 224,937 $ 329,681 $ 529,259 222,489 $ 51,684 $ 9,274 $ 1,367,324 For the Year Ended December 31, 2016 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Allowance for loan losses Balance, beginning of year $ 704 $ 2,212 $ 1,308 $ 908 $ 222 $ 68 $ 5,422 Provision for loan losses (331) 90 654 466 47 34 960 Transfer out — (132) — — — — (132) Loans charged to the allowance — — — — — — — Recoveries of loans previously charged off — — — — — — — Balance, end of year $ 373 $ 2,170 1,962 $ 1,374 $ 269 $ 102 $ 6,250 |
Schedule of credit risk profile of loan portfolio | December 31, 2018 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Special Mention (Watch) $ — $ 443 $ 71,734 $ 14,650 $ 3,096 $ 681 $ 90,604 Substandard 575 1,606 — 8,576 370 58 11,185 Doubtful — — — — — — — Acceptable and Above 336,757 408,822 842,659 275,968 75,789 16,343 1,956,338 Total $ 337,332 $ 410,871 $ 914,393 $ 299,194 $ 79,255 $ 17,082 $ 2,058,127 December 31, 2017 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Special Mention (Watch) $ — $ — $ 1,800 $ 12,608 $ 323 $ 1,563 $ 16,294 Substandard — 729 — 6,179 282 146 7,336 Doubtful — — — — — — — Acceptable and Above 224,937 329,681 527,459 209,881 51,361 7,711 1,351,030 Total $ 224,937 $ 330,410 $ 529,259 $ 228,668 $ 51,966 $ 9,420 $ 1,374,660 |
Schedule of aging analysis of the recorded investment in loans | December 31, 2018 30-59 Days 60-89 Days Greater Than Total Total Past Due Past Due 90 Days Past Due Current Loans (In thousands) MTG WHLOC $ — $ — $ 324 $ 324 $ 337,008 $ 337,332 RES RE 579 178 825 1,582 409,289 410,871 MF RE — — — — 914,393 914,393 CML & CRE 245 52 253 550 298,644 299,194 AG & AGRE 91 — 588 679 78,576 79,255 CON & MAR 2 52 28 82 17,000 17,082 $ 917 $ 282 $ 2,018 $ 3,217 $ 2,054,910 $ 2,058,127 December 31, 2017 30-59 Days 60-89 Days Greater Than Total Total Past Due Past Due 90 Days Past Due Current Loans (In thousands) MTG WHLOC $ — $ — $ — $ — $ 224,937 $ 224,937 RES RE — 194 534 728 329,682 330,410 MF RE — — — — 529,259 529,259 CML & CRE — 860 2,061 2,921 225,747 228,668 AG & AGRE 59 — 399 458 51,508 51,966 CON & MAR — — 146 146 9,274 9,420 $ 59 $ 1,054 $ 3,140 $ 4,253 $ 1,370,407 $ 1,374,660 |
Schedule of components of impaired loans and specific valuation allowance | December 31, 2018 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Impaired loans without a specific allowance: Recorded investment $ 251 $ 1,606 $ — $ 5,636 $ 88 $ 58 $ 7,639 Unpaid principal balance 251 1,606 — 5,636 88 58 7,639 Impaired loans with a specific allowance: Recorded investment 324 — — 2,940 282 — 3,546 Unpaid principal balance 324 — — 2,940 282 — 3,546 Specific allowance 225 — — 400 20 — 645 Total impaired loans: Recorded investment 575 1,606 — 8,576 370 58 11,185 Unpaid principal balance 575 1,606 — 8,576 370 58 11,185 Specific allowance 225 — — 400 20 — 645 December 31, 2017 MTG WHLOC RES RE MF RE CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Impaired loans without a specific allowance: Recorded investment $ — $ 729 $ — $ 4,119 $ — $ — $ 4,848 Unpaid principal balance — 729 — 4,119 — — 4,848 Impaired loans with a specific allowance: Recorded investment — — — 2,060 282 146 2,488 Unpaid principal balance — — — 2,060 282 146 2,488 Specific allowance — — — 200 16 146 362 Total impaired loans: Recorded investment — 729 — 6,179 282 146 7,336 Unpaid principal balance — 729 — 6,179 282 146 7,336 Specific allowance — — — 200 16 146 362 |
Schedule of average recorded investment and interest income recognized in impaired loans | December 31, 2018 MTG CML & AG & CON & WHLOC RES RE MF RE CRE AGRE MAR TOTAL (In thousands) Average recorded investment in impaired loans $ 932 $ 1,485 $ — $ 8,872 $ 489 $ 52 $ 11,830 Interest income recognized 59 50 — 375 43 1 528 December 31, 2017 MTG WHLOC RES RE MF CML & CRE AG & AGRE CON & MAR TOTAL (In thousands) Average recorded investment in impaired loans $ — $ 156 $ — $ 3,703 $ 282 $ 197 $ 4,338 Interest income recognized — 1 — 182 — — 183 December 31, 2016 MTG CML & AG & CON & WHLOC RES RE MF RE CRE AGRE MAR TOTAL (In thousands) Average recorded investment in impaired loans $ — $ 155 $ — $ 2,222 $ 17 $ — $ 2,394 Interest income recognized — — — 39 — — 39 |
Schedule of nonaccrual loans and loans past due 90 days or more and still accruing | December 31, December 31, 2018 2017 Total Loans > Total Loans > 90 Days & 90 Days & Nonaccrual Accruing Nonaccrual Accruing (In thousands) MTG WHLOC $ 575 $ — $ — $ — RES RE 893 74 60 475 MF RE — — — — CML & CRE 136 117 2,060 — AG & AGRE 282 307 282 117 CON & MAR 18 9 146 — $ 1,904 $ 507 $ 2,548 $ 592 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Derivative Financial Instruments | |
Summary of notional amount and fair value of interest rate locks and forward contracts utilized | Notional Fair Value Amount Balance Sheet Location Asset (Liability) December 31, 2018 (In thousands) (In thousands) Interest rate lock commitments $ 8,812 Derivative assets/liabilities $ 70 $ — Forward contracts 19,640 Derivative assets/liabilities — 9 $ 70 $ 9 |
Summarizes the periodic changes in the fair value of the derivative financial instruments on the condensed consolidated statements of income | Year Ended December 31, 2018 2017 (In thousands) Interest rate lock commitments $ 70 $ — Forward contracts (1) (64) — Net derivative gains (losses) 6 $ — _________________________________ (1) Amount includes pair-off settlements. |
Loan Servicing (Tables)
Loan Servicing (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Loan Servicing | |
Schedule of mortgage servicing rights measured using fair value method | For the Year Ended December 31, 2018 2017 2016 (In thousands) Balance, beginning of period $ 66,079 $ 53,670 $ 55,553 Additions Originated and purchased servicing 14,113 10,993 5,745 Acquisition of MCS — 3,970 — Subtractions Paydowns (4,196) (5,504) (4,230) Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model 1,848 2,950 (3,398) Balance, end of period $ 77,844 $ 66,079 $ 53,670 |
Goodwill and Intangibles (Table
Goodwill and Intangibles (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangibles | |
Schedule of goodwill | 2018 2017 2016 Multifamily Banking Warehouse Total Multifamily Banking Warehouse Total Multifamily Banking Warehouse Total (In thousands) (In thousands) (In thousands) Balance, beginning of period $ 3,379 $ 523 $ — $ 3,902 $ — $ 523 $ — $ 523 $ — $ 523 $ — $ 523 Goodwill acquired during the period — 8,163 5,000 13,163 3,379 — — 3,379 — — — — Post-acquisition adjustment 412 — — 412 — — — — — — — — Impairment losses — — — — — — — — — — — — Balance, end of period $ 3,791 $ 8,686 $ 5,000 $ 17,477 $ 3,379 $ 523 $ — $ 3,902 $ — $ 523 $ — $ 523 |
Schedule of intangible assets | 2018 2017 2016 Gross Gross Gross Carrying Accumulated Carrying Accumulated Carrying Accumulated Amount Amortization Total Amount Amortization Total Amount Amortization Total (In thousands) (In thousands) (In thousands) Licenses $ 1,370 $ (269) $ 1,101 $ 1,370 $ (74) $ 1,296 $ — $ — $ — Trade names 224 (31) 193 224 (8) 216 — — — Core deposit intangible 2,417 (169) 2,248 — — — — — — Total intangible Assets $ 4,011 $ (469) $ 3,542 $ 1,594 $ (82) $ 1,512 $ — $ — $ — |
Estimated amortization expense | Year ending December 31, 2019 $ 639 2020 619 2021 577 2022 521 2023 462 Thereafter 724 Total $ 3,542 |
Premises and Equipment (Tables)
Premises and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Premises and Equipment | |
Schedule of premises and equipment stated at cost | December 31, 2018 2017 (In thousands) Land $ 3,072 $ 2,260 Buildings 4,095 3,140 Building in progress 8,272 407 Leasehold improvements 83 71 Furniture, fixtures and equipment 2,427 2,131 Total cost 17,949 8,009 Accumulated depreciation (2,813) (2,655) Net premises and equipment $ 15,136 $ 5,354 |
Deposits (Tables)
Deposits (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Deposits | |
Schedule of deposits | December 31, 2018 2017 (In thousands) Demand deposits $ 1,548,969 $ 1,279,145 Savings deposits 1,001,663 1,255,460 Certificates of deposit 680,454 408,956 Total deposits $ 3,231,086 $ 2,943,561 |
Schedule of maturities of time deposits | December 31, 2018 (In thousands) Due within one year $ 648,173 Due in one year to two years 18,062 Due in two years to three years 9,727 Due in three years to four years 2,964 Due in four years to five years 1,528 $ 680,454 |
Schedule of brokered deposit amounts | December 31, 2018 2017 (In thousands) Brokered certificates of deposit $ 578,471 $ 347,000 Brokered savings deposits 109,607 389,475 Brokered deposit on demand accounts 300,134 205,039 $ 988,212 $ 941,514 |
Borrowings (Tables)
Borrowings (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Borrowings | |
Schedule of borrowings | December 31, 2018 2017 (In thousands) Lines of credit $ 33,150 $ 25,000 Short-term subordinated debt 10,582 30,000 FHLB advances 151,721 1,612 Total borrowings $ 195,453 $ 56,612 |
Schedule of maturities of FHLB advances | December 31, 2018 (In thousands) Due within one year $ 149,304 Due in one year to two years 590 Due in two years to three years 77 Due in three years to four years 59 Due in four years to five years 342 Thereafter 1,349 $ 151,721 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Schedule of provision for income taxes includes components | Year Ended December 31, 2018 2017 2016 (In thousands) Income tax expense Current tax payable Federal $ 13,312 $ 21,413 $ 18,627 State 5,528 3,479 4,477 Deferred tax payable Federal 1,583 (2,627) (441) State 730 212 (995) Income tax expense $ 21,153 $ 22,477 $ 21,668 Effective tax rate 25.2 % 29.1 % 39.5 % |
Schedule of a reconciliation of statutory federal tax rate and effective tax rate | Year Ended December 31, 2018 2017 2016 (In thousands) Computed at the statutory rate (21% for 2018 and 35% for 2017 and 2016) $ 17,646 $ 27,006 $ 19,178 Increase resulting from State income taxes 4,944 2,399 2,264 Effect of Tax Cuts and Jobs Act — (6,928) — Low income housing tax credits (1,533) — — Other 96 — 226 Actual tax expense $ 21,153 $ 22,477 $ 21,668 |
Schedule of tax effects of temporary differences related to deferred taxes | December 31, 2018 2017 (In thousands) Deferred tax assets Allowance for loan losses $ 3,366 $ 2,216 Unrealized loss on available-for-sale securities 148 442 Other 854 1,548 Total assets 4,368 4,206 Deferred tax liabilities Depreciation (466) (147) Intangible assets (618) — Mortgage-servicing rights (17,477) (15,548) Limited partnership investments (2,212) (1,446) Fair value adjustments on acquisitions (3) — Total liabilities (20,776) (17,141) Net deferred tax liability $ (16,408) $ (12,935) |
Regulatory Matters (Tables)
Regulatory Matters (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Regulatory Matters | |
Summary of bank's actual capital amounts and ratios | Minimum Amount Required for Minimum Amount Adequately To Be Well Actual Capitalized (1) Capitalized (1) Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2018 Total capital (1) (to risk-weighted assets) Company $ 393,654 12.3 % $ 255,884 8.0 % $ — N/A Merchants Bank 412,386 13.3 % 248,290 8.0 % 310,363 10.0 % FMBI 17,537 18.6 % 7,559 8.0 % 9,448 10.0 % Tier 1 capital (1) (to risk-weighted assets) Company 380,950 11.9 % 191,913 6.0 % — N/A Merchants Bank 399,815 12.9 % 186,218 6.0 % 248,290 8.0 % FMBI 17,404 18.4 % 5,669 6.0 % 7,559 8.0 % Common Equity Tier 1 capital (1) (to risk-weighted assets) Company 339,369 10.6 % 143,935 4.5 % — N/A Merchants Bank 399,815 12.9 % 139,663 4.5 % 201,736 6.5 % FMBI 17,404 18.4 % 4,252 4.5 % 6,141 6.5 % Tier 1 capital (1) (to average assets) Company 380,950 10.0 % 152,081 4.0 % — N/A Merchants Bank 399,815 11.0 % 145,723 4.0 % 182,154 5.0 % FMBI 17,404 10.8 % 6,453 4.0 % 8,066 5.0 % (1) As defined by regulatory agencies. Minimum Minimum Amount Required Amount To Be for Adequately Well Actual Capitalized (1) Capitalized (1) Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2017 Total capital (1) (to risk-weighted assets) Company $ 355,722 13.7 % $ 207,657 8.0 % $ — N/A Merchants Bank 406,638 15.7 % 207,567 8.0 % 259,459 10.0 % Tier I capital (1) (to risk-weighted assets) Company 347,411 13.4 % 155,743 6.0 % — N/A Merchants Bank 398,327 15.4 % 155,675 6.0 % 207,567 8.0 % Common Equity Tier I capital (1) (to risk-weighted assets) Company 305,830 11.8 % 116,807 4.5 % — N/A Merchants Bank 398,327 15.4 % 116,756 4.5 % 168,648 6.5 % Tier I capital (1) (to average assets) Company 347,411 10.9 % 127,318 4.0 % — N/A Merchants Bank 398,327 12.5 % 127,593 4.0 % 159,491 5.0 % (1) As defined by regulatory agencies. Beginning January 1, 2015, the Basel III Capital Rules applied to Merchants Bank. The following table lists the capital categories and ratios determined by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation. Common Equity Total Risk-based Tier 1 Risk-based Tier 1 Risk-based Tier 1 Capital Category Capital ratio Capital ratio Capital ratio Leverage ratio Well capitalized 10 % 8 % 6.5 % 5 % Adequately capitalized 8 6 4.5 4 Undercapitalized <8 <6 <4.5 <4 Significantly undercapitalized <6 <4 <3 <3 Critically undercapitalized Tangible Equity/Total Assets </= 2% |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per share | |
Schedule of computation of earnings per share | Year Ended December 31, 2018 2017 2016 Weighted- Per Weighted- Per Weighted- Per Net Average Share Net Average Share Net Average Share Income Shares Amount Income Shares Amount Income Shares Amount (In thousands) (In thousands) (In thousands) Net income $ 62,874 $ 54,684 $ 33,127 Dividends on preferred stock (3,330) (3,330) (2,002) Net income allocated to common shareholders $ 59,544 $ 51,354 $ 31,125 Basic earnings per share 28,692,955 $ 2.08 22,551,452 $ 2.28 21,111,208 $ 1.47 Effect of dilutive securities—restricted stock awards 31,464 16,702 2,227 Diluted earnings per share 28,724,419 $ 2.07 22,568,154 $ 2.28 21,113,435 $ 1.47 |
Disclosures about Fair Value _2
Disclosures about Fair Value of Assets and Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosures about Fair Value of Assets and Liabilities | |
Schedule of fair value measurement of assets measured at fair value on recurring basis | Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Fair Assets Inputs Inputs Assets Value (Level 1) (Level 2) (Level 3) (In thousands) December 31, 2018 Trading securities $ 163,419 $ — $ 163,419 $ — Available-for-sale securities: Treasury notes 11,941 11,941 — — Federal agencies 236,930 — 236,930 — Municipals 21,332 — 21,332 — Mortgage-backed - Government-sponsored entity (GSE) - residential 60,868 — 60,868 — Loans held for sale 11,886 — 11,886 — Mortgage servicing rights 77,844 — — 77,844 Derivative assets - interest rate lock commitments 70 — — 70 Derivative liabilities - forward contracts 9 — 9 — December 31, 2017 Trading securities $ 140,837 $ — $ 140,837 $ — Available-for-sale securities: Treasury notes 992 992 — — Federal agencies 374,731 — 374,731 — Municipals 6,688 — — 6,688 Mortgage-backed - Government-sponsored entity (GSE) - residential 25,960 — 25,960 — Mortgage servicing rights 66,079 — — 66,079 |
Schedule of Level 3 reconciliation of recurring fair value measurements | Year Ended December 31, 2018 2017 2016 (In thousands) Mortgage servicing rights Balance, beginning of period $ 66,079 $ 53,670 $ 55,553 Additions Originated and purchased servicing 14,113 10,993 5,745 Acquisition of MCS — 3,970 — Subtractions Paydowns (4,196) (5,504) (4,230) Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model 1,848 2,950 (3,398) Balance, end of period $ 77,844 $ 66,079 $ 53,670 Available-for-sale securities - Municipals Balance, beginning of period $ 6,688 $ — $ — Additions Purchased securities — 6,688 — Subtractions Paydowns (257) — — Sales (6,431) — — Unrealized gains (losses) included in other comprehensive income — — — Balance, end of period $ — $ 6,688 $ — Derivative Assets - interest rate lock commitments Balance, beginning of period $ — $ — $ — Purchases — — Changes in fair value 70 — Balance, end of period $ 70 $ — $ — |
Schedule of fair value measurement of assets and liabilities measured at fair value on nonrecurring basis | Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Fair Assets Inputs Inputs Assets Value (Level 1) (Level 2) (Level 3) (In thousands) December 31, 2018 Impaired loans (collateral-dependent) $ 2,639 $ — $ — $ 2,639 December 31, 2017 Impaired loans (collateral-dependent) $ 2,126 $ — $ — $ 2,126 |
Schedule of quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill | Valuation Fair Value Technique Unobservable Inputs Range (In thousands) At December 31, 2018: Collateral-dependent impaired loans $ 2,639 Market comparable properties Marketability discount 17%-59% Mortgage servicing rights $ 77,844 Discounted cash flow Discount rate 8% - 13% Constant prepayment rate 1% - 30% Derivative assets - interest rate lock commitments $ 70 Discounted cash flow loan closing rates 95-100% At December 31, 2017: Collateral-dependent impaired loans $ 2,126 Market comparable properties Marketability discount 5% - 47% Mortgage servicing rights $ 66,079 Discounted cash flow Discount rate 8% - 13% Constant prepayment rate 1% - 36% |
Schedule of carrying amount and estimated fair value of financial instruments | Fair Value Measurements Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Carrying Fair Assets Inputs Inputs Assets Value Value (Level 1) (Level 2) (Level 3) (In thousands) December 31, 2018 Financial assets: Cash and cash equivalents $ 336,524 $ 336,524 $ 336,524 $ — $ — Securities purchased under agreements to resell 6,875 6,875 — 6,875 — FHLB stock 7,974 7,974 — 7,974 — Loans held for sale 820,569 820,569 — 820,569 — Loans, net 2,045,423 2,041,772 — — 2,041,772 Interest receivable 13,827 13,827 — 13,827 — Financial liabilities: Deposits 3,231,086 3,230,397 2,550,632 679,765 — Lines of credit 33,150 33,150 — 33,150 — Short-term subordinated debt 10,582 10,582 — 10,582 — FHLB advances 151,721 151,723 — 151,723 — Interest payable 4,132 4,132 — 4,132 — December 31, 2017 Financial assets: Cash and cash equivalents $ 359,519 $ 359,519 $ 359,519 $ — $ — Securities purchased under agreements to resell 7,043 7,043 — 7,043 — FHLB stock 7,539 7,539 — 7,539 — Loans held for sale 995,319 995,319 — 995,319 — Loans, net 1,366,349 1,364,568 — — 1,364,568 Interest receivable 8,326 8,326 — 8,326 — Financial liabilities: Deposits 2,943,561 2,943,173 2,534,605 408,568 — Line of credit 25,000 25,000 — 25,000 — Short-term subordinated debt 30,000 30,000 — 30,000 — FHLB advances 1,612 1,620 — 1,620 — Interest payable 2,817 2,817 — 2,817 — |
Commitments and Credit Risk (Ta
Commitments and Credit Risk (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Credit Risk | |
Schedule of business segment financial information | December 31, 2018 2017 (In thousands) Commitments to extend credit $ 676,987 $ 437,585 Irrevocable standby letters of credit 3,164 26,000 Commitment letters of credit 19,866 31,031 |
Schedule of future minimum lease payments under operating leases | December 31, 2018 (In thousands) Due within one year $ 1,021 Due in one year to two years 1,085 Due in two years to three years 736 Due in three years to four years 550 Due in four years to five years 554 Thereafter 426 Total minimum lease payments $ 4,372 |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Information | |
Schedule of business segment financial information | Multi-family Mortgage Mortgage Banking Warehousing Banking Other Total (In thousands) Year Ended December 31, 2018 Total interest income $ 712 $ 58,784 $ 79,332 $ 1,735 $ 140,563 Total interest expense — 24,369 29,508 (3,285) 50,592 Net interest income 712 34,415 49,824 5,020 89,971 Provision for loan losses — 1,372 3,257 — 4,629 Net interest income after provision for loan losses 712 33,043 46,567 5,020 85,342 Total noninterest income 45,831 2,550 3,150 (1,946) 49,585 Noninterest expense 19,205 7,721 14,876 9,098 50,900 Income before income taxes 27,338 27,872 34,841 (6,024) 84,027 Income taxes 7,528 6,872 8,572 (1,819) 21,153 Net income $ 19,810 $ 21,000 $ 26,269 $ (4,205) $ 62,874 Total assets $ 166,102 $ 1,430,776 $ 2,256,687 $ 30,598 $ 3,884,163 Multi-family Mortgage Mortgage Banking Warehousing Banking Other Total (In thousands) Year Ended December 31, 2017 Total interest income $ 414 $ 48,798 $ 44,454 $ 721 $ 94,387 Total interest expense — 13,673 14,853 (736) 27,790 Net interest income 414 35,125 29,601 1,457 66,597 Provision for loan losses — 452 2,020 — 2,472 Net interest income after provision for loan losses 414 34,673 27,581 1,457 64,125 Total noninterest income 43,715 2,836 1,943 (814) 47,680 Noninterest expense 10,911 7,710 9,835 6,188 34,644 Income before income taxes 33,218 29,799 19,689 (5,545) 77,161 Income taxes 4,557 11,558 8,279 (1,917) 22,477 Net income $ 28,661 $ 18,241 $ 11,410 $ (3,628) $ 54,684 Total assets $ 134,390 $ 1,352,748 $ 1,889,140 $ 16,855 $ 3,393,133 Multi-family Mortgage Mortgage Banking Warehousing Banking Other Total (In thousands) Year Ended December 31, 2016 Total interest income $ 237 $ 43,352 $ 29,350 $ — $ 72,939 Total interest expense — 11,235 6,546 1,187 18,968 Net interest income 237 32,117 22,804 (1,187) 53,971 Provision for loan losses — (247) 1,207 — 960 Net interest income after provision for loan losses 237 32,364 21,597 (1,187) 53,011 Total noninterest income 22,798 3,220 2,486 — 28,504 Noninterest expense 7,474 7,730 8,383 3,133 26,720 Income before income taxes 15,561 27,854 15,700 (4,320) 54,795 Income taxes 6,153 11,015 6,208 (1,708) 21,668 Net income $ 9,408 $ 16,839 $ 9,492 $ (2,612) $ 33,127 Total assets $ 98,553 $ 1,060,723 $ 1,545,783 $ 13,453 $ 2,718,512 |
Condensed Financial Informati_2
Condensed Financial Information (Parent Company Only) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Condensed Financial Information (Parent Company Only) | |
Summary of Condensed Balance Sheets | December 31, 2018 2017 (In thousands) Assets Cash and cash equivalents $ 2,224 $ 7,273 Investment in subsidiaries 453,028 411,528 Other assets 2,104 5,597 Total assets $ 457,356 $ 424,398 Liabilities Lines of credit $ 25,000 $ 25,000 Short-term subordinated debt 10,582 30,000 Other liabilities 537 1,924 Total liabilities 36,119 56,924 Shareholders’ Equity 421,237 367,474 Total liabilities and shareholders’ equity $ 457,356 $ 424,398 |
Summary of Condensed Statements of Income and Comprehensive Income | Year Ended December 31, 2018 2017 2016 (In thousands) Income Dividends and return of capital from subsidiaries 37,816 13,632 16,223 Other Income 195 208 196 Total income 38,011 13,840 16,419 Expenses Interest expense 8,055 7,603 7,237 Salaries and employee benefits 1,216 1,617 77 Professional fees 707 341 138 Other 420 251 33 Total expense 10,398 9,812 7,485 Income Before Income Tax and Equity in Undistributed Income of Subsidiaries 27,613 4,028 8,934 Income Tax Benefit (2,542) (3,670) (2,885) Income Before Equity in Undistributed Income of Subsidiaries 30,155 7,698 11,819 Equity in Undistributed Income of Subsidiaries 32,719 46,986 21,308 Net Income $ 62,874 $ 54,684 $ 33,127 Comprehensive Income $ 63,813 $ 54,306 $ 32,731 |
Summary of Condensed Statements of Cash Flows | Year Ended December 31, 2018 2017 2016 (In thousands) Operating Activities Net income $ 62,874 $ 54,684 $ 33,127 Adjustments to reconcile net income to net cash used in operating activities (30,522) (44,185) (26,561) Net cash provided by operating activities 32,352 10,499 6,566 Investing Activities Return of capital from/(contributed capital to) subsidiaries 19,368 (101,868) (31,625) Net cash paid for acquisitions (27,209) — — Other investing activity 74 189 (295) Net cash used in investing activities (7,767) (101,679) (31,920) Financing Activities Net change in short-term subordinated debt (19,418) — — Dividends paid (10,216) (7,950) (6,224) Proceeds from issuance of common stock — 106,245 — Proceeds from issuance of preferred stock — — 31,581 Net cash provided by (used in) financing activities (29,634) 98,295 25,357 Net Change in Cash and Due From Banks (5,049) 7,115 3 Cash and Due From Banks at Beginning of Year 7,273 158 155 Cash and Due From Banks at End of Year $ 2,224 $ 7,273 158 |
Quarterly Condensed Financial_2
Quarterly Condensed Financial Information (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Condensed Financial Information (Unaudited) | |
Schedule of quarterly condensed financial information (unaudited) | 2018 Quarter Ended (Dollars in thousands, except per share data) March 31 June 30 September 30 December 31 Interest income $ 29,038 $ 34,123 $ 37,577 $ 39,825 Interest expense 8,930 11,917 14,095 15,650 Net interest income 20,108 22,206 23,482 24,175 Provision for loan losses 1,406 998 617 1,608 Net interest income after provision for loan losses 18,702 21,208 22,865 22,567 Noninterest income 11,313 11,630 11,907 14,735 Noninterest expense 10,270 12,000 12,449 16,181 Income before income taxes 19,745 20,838 22,323 21,121 Income taxes 4,684 5,186 5,584 5,699 Net income 15,061 15,652 16,739 15,422 Less: preferred stock dividends 833 832 833 832 Net income allocated to common shareholders $ 14,228 $ 14,820 $ 15,906 $ 14,590 Per common share data: Basic earnings per common share $ 0.50 $ 0.52 $ 0.55 $ 0.51 Diluted earnings per common share 0.50 0.52 0.55 0.51 2017 Quarter Ended (Dollars in thousands, except per share data) March 31 June 30 September 30 December 31 Interest income $ 19,007 $ 22,464 $ 26,006 $ 26,910 Interest expense 5,476 6,740 7,616 7,958 Net interest income 13,531 15,724 18,390 18,952 Provision for loan losses 240 240 592 1,400 Net interest income after provision for loan losses 13,291 15,484 17,798 17,552 Noninterest income 8,091 16,626 8,056 14,907 Noninterest expense 6,641 8,261 8,942 10,800 Income before income taxes 14,741 23,849 16,912 21,659 Income taxes 5,611 9,091 6,445 1,330 Net income 9,130 14,758 10,467 20,329 Less: preferred stock dividends 832 832 833 833 Net income allocated to common shareholders $ 8,298 $ 13,926 $ 9,634 $ 19,496 Per common share data: Basic earnings per common share $ 0.39 $ 0.66 $ 0.45 $ 0.73 Diluted earnings per common share 0.39 0.66 0.45 0.73 |
Nature of Operations and Summ_4
Nature of Operations and Summary of Significant Accounting Policies - Operations (Details) | 12 Months Ended |
Dec. 31, 2018item | |
Merchants Bank | |
Nature of Operations and Principles of Consolidation | |
Number of locations of operation | 4 |
FMBI | |
Nature of Operations and Principles of Consolidation | |
Number of locations of operation | 5 |
Nature of Operations and Summ_5
Nature of Operations and Summary of Significant Accounting Policies - Recent Acquisitions (Details) - USD ($) | Dec. 31, 2018 | Oct. 01, 2018 | Jan. 02, 2018 | Aug. 15, 2017 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Acquisitions | |||||||||
Goodwill | $ 17,477,000 | $ 17,477,000 | $ 3,902,000 | $ 523,000 | $ 523,000 | ||||
Total assets | 3,884,163,000 | 3,884,163,000 | 3,393,133,000 | $ 2,718,512,000 | |||||
Fair Value of available for sale securities | 331,071,000 | 331,071,000 | 408,371,000 | ||||||
Time deposits at fair value | 680,454,000 | 680,454,000 | 408,956,000 | ||||||
Deposits | 3,231,086,000 | 3,231,086,000 | 2,943,561,000 | ||||||
Loans Receivable, Net | 2,045,423,000 | $ 2,045,423,000 | 1,366,349,000 | ||||||
Core Deposits | |||||||||
Acquisitions | |||||||||
Useful life | 10 years | ||||||||
MCS | |||||||||
Acquisitions | |||||||||
Percentage of voting interests acquired | 100.00% | ||||||||
Purchase price paid shares | $ 8,100,000 | ||||||||
Goodwill | 3,800,000 | ||||||||
Intangible assets | $ 1,600,000 | ||||||||
FMBI | |||||||||
Acquisitions | |||||||||
Total assets | 43,000,000 | ||||||||
Deposits | 36,900,000 | ||||||||
FMBI | Stock Purchase Agreement | |||||||||
Acquisitions | |||||||||
Total cost | $ 5,500,000 | ||||||||
Goodwill | 988,000 | ||||||||
Intangible assets | 478,000 | ||||||||
Time deposits | 16,700,000 | ||||||||
Time deposits at fair value | 16,900,000 | ||||||||
Fair value premium of acquired time deposits | $ 185,000 | ||||||||
Time deposits, fair value premium, accretion period | 20 months | ||||||||
Acquired loan portfolio | $ 27,900,000 | ||||||||
Acquired loan portfolio at fair value | 27,500,000 | ||||||||
Fair value discount on acquired loan portfolio | $ 458,000 | ||||||||
Acquired loan portfolio, fair value discount, accretion period | 39 months | ||||||||
FMBI | Core Deposits | |||||||||
Acquisitions | |||||||||
Useful life | 10 years | ||||||||
FMBI | Core Deposits | Stock Purchase Agreement | |||||||||
Acquisitions | |||||||||
Useful life | 10 years | ||||||||
FM Bancorp, Inc | |||||||||
Acquisitions | |||||||||
Outstanding shares of the acquiree | 27,537 | ||||||||
Share price per share | $ 795.29 | ||||||||
Total cost | $ 21,900,000 | ||||||||
Goodwill | 7,200,000 | ||||||||
Intangible assets | 1,900,000 | ||||||||
Fair Value of available for sale securities | 66,300,000 | ||||||||
Fair value discount on available for sale securities | 1,000,000 | ||||||||
Time deposits | 95,700,000 | ||||||||
Time deposits at fair value | 95,700,000 | ||||||||
Acquired loan portfolio | 35,400,000 | ||||||||
Acquired loan portfolio at fair value | 34,800,000 | ||||||||
Fair value discount on acquired loan portfolio | 625,000 | ||||||||
Discount related to interest assumption | 279,000 | ||||||||
Discount related to credit assumption | $ 346,000 | ||||||||
Acquired loan portfolio, fair value discount, accretion period | 72 months | ||||||||
FM Bancorp, Inc | Core Deposits | |||||||||
Acquisitions | |||||||||
Useful life | 10 years | ||||||||
NattyMac, LLC | |||||||||
Acquisitions | |||||||||
Goodwill | 5,000,000 | $ 5,000,000 | |||||||
Repayments of subordinated debt | $ 30,000,000 | ||||||||
FMBI | |||||||||
Acquisitions | |||||||||
Total assets | $ 43,000,000 | ||||||||
FM Bancorp | |||||||||
Acquisitions | |||||||||
Total assets | $ 110,000,000 | ||||||||
Fair Value of available for sale securities | 66,300,000 | ||||||||
Deposits | 95,700,000 | ||||||||
Loans Receivable, Net | $ 35,000,000 |
Nature of Operations and Summ_6
Nature of Operations and Summary of Significant Accounting Policies - Other (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Cash and Cash Equivalents | ||
Cash accounts in excess of federally insured limits | $ 331,200,000 | $ 349,400,000 |
Cash accounts in excess of federally insured limits with Federal Reserve Bank | 295,400,000 | 327,400,000 |
Cash accounts in excess of federally insured limits with Federal Home Loan Bank of Indianapolis | 12,900,000 | $ 3,500,000 |
Cash accounts in excess of federally insured limits with Federal Home Loan Bank of Chicago | $ 15,000 | |
Loans Held for Sale under Mortgage Banking Activities | ||
Maximum participation interest to be purchased in individual loans (as a percent) | 100.00% |
Nature of Operations and Summ_7
Nature of Operations and Summary of Significant Accounting Policies - Premises and Equipment (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Vehicles | |
Premises and Equipment | |
Estimated useful lives | P5Y |
Minimum | Buildings | |
Premises and Equipment | |
Estimated useful lives | P10Y |
Minimum | Leasehold improvements | |
Premises and Equipment | |
Estimated useful lives | P5Y |
Minimum | Furniture, fixtures and equipment | |
Premises and Equipment | |
Estimated useful lives | P3Y |
Maximum | Buildings | |
Premises and Equipment | |
Estimated useful lives | P40Y |
Maximum | Leasehold improvements | |
Premises and Equipment | |
Estimated useful lives | P39Y |
Maximum | Furniture, fixtures and equipment | |
Premises and Equipment | |
Estimated useful lives | P10Y |
Nature of Operations and Summ_8
Nature of Operations and Summary of Significant Accounting Policies - Goodwill and Intangible Assets (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Core Deposits | |
Intangible assets | |
Amortization period | 10 years |
Minimum | |
Intangible assets | |
Amortization period | 84 months |
Maximum | |
Intangible assets | |
Amortization period | 120 months |
Nature of Operations and Summ_9
Nature of Operations and Summary of Significant Accounting Policies - Shared-based Compensation (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Share-based Compensation Plan | |
Share awards vesting period | 3 years |
Restriction on Cash and Due F_2
Restriction on Cash and Due From Banks (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Restriction on Cash and Due From Banks | ||
Reserve required for restriction on cash and due from banks | $ 114.2 | $ 104.2 |
Securities - Trading Securities
Securities - Trading Securities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Trading Securities | ||
Unrealized gains included in trading securities | $ 870,000 | $ 643,000 |
Securities - Amortized Cost to
Securities - Amortized Cost to Approximate Fair Value (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Available-for-sale securities: | ||
Amortized Cost | $ 331,529 | $ 410,062 |
Gross Unrealized Gains | 624 | |
Gross Unrealized Losses | 1,082 | 1,691 |
Fair Value of available for sale securities | 331,071 | 408,371 |
Treasury notes | ||
Available-for-sale securities: | ||
Amortized Cost | 11,928 | 1,000 |
Gross Unrealized Gains | 26 | |
Gross Unrealized Losses | 13 | 8 |
Fair Value of available for sale securities | 11,941 | 992 |
Federal agencies | ||
Available-for-sale securities: | ||
Amortized Cost | 237,894 | 376,414 |
Gross Unrealized Gains | 8 | |
Gross Unrealized Losses | 972 | 1,683 |
Fair Value of available for sale securities | 236,930 | 374,731 |
Municipals | ||
Available-for-sale securities: | ||
Amortized Cost | 21,014 | 6,688 |
Gross Unrealized Gains | 336 | |
Gross Unrealized Losses | 18 | |
Fair Value of available for sale securities | 21,332 | 6,688 |
Mortgage-backed - Government-sponsored entity (GSE) - residential | ||
Available-for-sale securities: | ||
Amortized Cost | 60,693 | 25,960 |
Gross Unrealized Gains | 254 | |
Gross Unrealized Losses | 79 | |
Fair Value of available for sale securities | $ 60,868 | $ 25,960 |
Securities - Contractual Maturi
Securities - Contractual Maturities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Contractual Maturities, Amortized Cost | ||
Within one year | $ 179,323 | |
After one through five years | 72,470 | |
After five through ten years | 7,087 | |
After ten years | 11,956 | |
Contractual Maturities, Amortized Cost, Single Maturity Date | 270,836 | |
Available-for-sale Securities, Amortized Cost Basis, Total | 331,529 | $ 410,062 |
Contractual Maturities, Fair Value | ||
Within one year | 178,581 | |
After one through five years | 72,282 | |
After five through ten years | 7,203 | |
After ten years | 12,137 | |
Contractual Maturities, Fair Value, Single Maturity Date | 270,203 | |
Fair Value of available for sale securities | 331,071 | 408,371 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | $ 240,155 | $ 375,723 |
Percentage of investment portfolio | 73.00% | 92.00% |
Investment securities pledged as collateral | $ 281,200 | $ 401,700 |
Mortgage-backed - Government-sponsored entity (GSE) - residential | ||
Contractual Maturities, Amortized Cost | ||
Contractual Maturities, Amortized Cost, Not Due at a Single Maturity Date | 60,693 | |
Available-for-sale Securities, Amortized Cost Basis, Total | 60,693 | 25,960 |
Contractual Maturities, Fair Value | ||
Contractual Maturities, Fair Value, Not Due at a Single Maturity Date | 60,868 | |
Fair Value of available for sale securities | 60,868 | $ 25,960 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | $ 15,543 |
Securities - Continuous Unreali
Securities - Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, Less than 12 Months | $ 47,880 | $ 192,056 |
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, 12 Months or Longer | 192,275 | 183,667 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total | 240,155 | 375,723 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Less than 12 Months | 202 | 911 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, 12 Months or Longer | 880 | 780 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Total | 1,082 | 1,691 |
Treasury notes | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, Less than 12 Months | 1,990 | 992 |
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, 12 Months or Longer | 995 | |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total | 2,985 | 992 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Less than 12 Months | 8 | 8 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, 12 Months or Longer | 5 | |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Total | 13 | 8 |
Federal agencies | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, Less than 12 Months | 28,296 | 191,064 |
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, 12 Months or Longer | 191,280 | 183,667 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total | 219,576 | 374,731 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Less than 12 Months | 97 | 903 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, 12 Months or Longer | 875 | 780 |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Total | 972 | $ 1,683 |
Municipals | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, Less than 12 Months | 2,051 | |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total | 2,051 | |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Less than 12 Months | 18 | |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Total | 18 | |
Mortgage-backed - Government-sponsored entity (GSE) - residential | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Fair Value, Less than 12 Months | 15,543 | |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total | 15,543 | |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses | ||
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Less than 12 Months | 79 | |
Available-for-sale securities, Continuous Unrealized Loss Position, Gross Unrealized Losses, Total | $ 79 |
Securities - Other (Details)
Securities - Other (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Securities | |||
Proceeds from the sale of securities available for sale | $ 6,431 | $ 0 | $ 7,371 |
Gain on sale of securities | 24 | ||
Realized gross gains on available for sale securities | $ 24 | ||
Investment securities pledged as collateral | $ 281,200 | $ 401,700 |
Loans and Allowance for Loan _3
Loans and Allowance for Loan Losses - Summary of Loans By Classification (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Loans and Allowance for Loan Losses | ||||
Loans | $ 2,058,127 | $ 1,374,660 | ||
Allowance for loan losses | 12,704 | 8,311 | $ 6,250 | $ 5,422 |
Loans and Leases Receivable, Net Amount, Total | $ 2,045,423 | 1,366,349 | ||
Minimum | ||||
Loans and Allowance for Loan Losses | ||||
Repayment Of Warehouse Term | 30 days | |||
Mortgage warehouse lines of credit | ||||
Loans and Allowance for Loan Losses | ||||
Loans | $ 337,332 | 224,937 | ||
Allowance for loan losses | 1,068 | 283 | 373 | 704 |
Residential real estate | ||||
Loans and Allowance for Loan Losses | ||||
Loans | 410,871 | 330,410 | ||
Allowance for loan losses | 1,986 | 1,587 | 2,170 | 2,212 |
Multi-family and healthcare financing | ||||
Loans and Allowance for Loan Losses | ||||
Loans | 914,393 | 529,259 | ||
Allowance for loan losses | 6,030 | 3,502 | 1,962 | 1,308 |
Commercial and commercial real estate | ||||
Loans and Allowance for Loan Losses | ||||
Loans | 299,194 | 228,668 | ||
Allowance for loan losses | 3,051 | 2,362 | 1,374 | 908 |
Agricultural production and real estate | ||||
Loans and Allowance for Loan Losses | ||||
Loans | 79,255 | 51,966 | ||
Allowance for loan losses | 429 | 320 | 269 | 222 |
Consumer and margin loans | ||||
Loans and Allowance for Loan Losses | ||||
Loans | 17,082 | 9,420 | ||
Allowance for loan losses | $ 140 | $ 257 | $ 102 | $ 68 |
Loans and Allowance for Loan _4
Loans and Allowance for Loan Losses - Allowance For Loan Losses (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for loan losses | |||
Balance, beginning of period | $ 8,311 | $ 6,250 | $ 5,422 |
Provision (credit) for loan losses | (4,629) | (2,472) | (960) |
Transfer out | (132) | ||
Loans charged to the allowance | (236) | (546) | |
Recoveries of loans previously charged off | (135) | ||
Balance, end of period | 12,704 | 8,311 | 6,250 |
Ending balance: individually evaluated for impairment | 645 | 362 | |
Ending balance: collectively evaluated for impairment | 12,059 | 7,949 | |
Loans | |||
Ending balance | 2,058,127 | 1,374,660 | |
Ending balance individually evaluated for impairment | 11,185 | 7,336 | |
Ending balance: collectively evaluated for impairment | 2,046,942 | 1,367,324 | |
Mortgage warehouse lines of credit | |||
Allowance for loan losses | |||
Balance, beginning of period | 283 | 373 | 704 |
Provision (credit) for loan losses | (785) | 90 | 331 |
Balance, end of period | 1,068 | 283 | 373 |
Ending balance: individually evaluated for impairment | 225 | ||
Ending balance: collectively evaluated for impairment | 843 | 283 | |
Loans | |||
Ending balance | 337,332 | 224,937 | |
Ending balance individually evaluated for impairment | 575 | ||
Ending balance: collectively evaluated for impairment | 336,757 | 224,937 | |
Residential real estate | |||
Allowance for loan losses | |||
Balance, beginning of period | 1,587 | 2,170 | 2,212 |
Provision (credit) for loan losses | (399) | 583 | (90) |
Transfer out | (132) | ||
Balance, end of period | 1,986 | 1,587 | 2,170 |
Ending balance: collectively evaluated for impairment | 1,986 | 1,587 | |
Loans | |||
Ending balance | 410,871 | 330,410 | |
Ending balance individually evaluated for impairment | 1,606 | 729 | |
Ending balance: collectively evaluated for impairment | 409,265 | 329,681 | |
Multi-family and healthcare financing | |||
Allowance for loan losses | |||
Balance, beginning of period | 3,502 | 1,962 | 1,308 |
Provision (credit) for loan losses | (2,528) | (1,540) | (654) |
Balance, end of period | 6,030 | 3,502 | 1,962 |
Ending balance: collectively evaluated for impairment | 6,030 | 3,502 | |
Loans | |||
Ending balance | 914,393 | 529,259 | |
Ending balance: collectively evaluated for impairment | 914,393 | 529,259 | |
Commercial and commercial real estate | |||
Allowance for loan losses | |||
Balance, beginning of period | 2,362 | 1,374 | 908 |
Provision (credit) for loan losses | (779) | (1,399) | (466) |
Loans charged to the allowance | (90) | (546) | |
Recoveries of loans previously charged off | (135) | ||
Balance, end of period | 3,051 | 2,362 | 1,374 |
Ending balance: individually evaluated for impairment | 400 | 200 | |
Ending balance: collectively evaluated for impairment | 2,651 | 2,162 | |
Loans | |||
Ending balance | 299,194 | 228,668 | |
Ending balance individually evaluated for impairment | 8,576 | 6,179 | |
Ending balance: collectively evaluated for impairment | 290,618 | 222,489 | |
Agricultural production and real estate | |||
Allowance for loan losses | |||
Balance, beginning of period | 320 | 269 | 222 |
Provision (credit) for loan losses | (109) | (51) | (47) |
Balance, end of period | 429 | 320 | 269 |
Ending balance: individually evaluated for impairment | 20 | 16 | |
Ending balance: collectively evaluated for impairment | 409 | 304 | |
Loans | |||
Ending balance | 79,255 | 51,966 | |
Ending balance individually evaluated for impairment | 370 | 282 | |
Ending balance: collectively evaluated for impairment | 78,885 | 51,684 | |
Consumer and margin loans | |||
Allowance for loan losses | |||
Balance, beginning of period | 257 | 102 | 68 |
Provision (credit) for loan losses | (29) | (155) | (34) |
Loans charged to the allowance | (146) | ||
Balance, end of period | 140 | 257 | $ 102 |
Ending balance: individually evaluated for impairment | 146 | ||
Ending balance: collectively evaluated for impairment | 140 | 111 | |
Loans | |||
Ending balance | 17,082 | 9,420 | |
Ending balance individually evaluated for impairment | 58 | 146 | |
Ending balance: collectively evaluated for impairment | $ 17,024 | $ 9,274 |
Loans and Allowance for Loan _5
Loans and Allowance for Loan Losses - Credit Risk Profile of Loan Portfolio (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Credit risk profile of portfolio | ||
Loans | $ 2,058,127 | $ 1,374,660 |
Special Mention (Watch) | ||
Credit risk profile of portfolio | ||
Loans | 90,604 | 16,294 |
Substandard | ||
Credit risk profile of portfolio | ||
Loans | 11,185 | 7,336 |
Acceptable and Above | ||
Credit risk profile of portfolio | ||
Loans | 1,956,338 | 1,351,030 |
Mortgage warehouse lines of credit | ||
Credit risk profile of portfolio | ||
Loans | 337,332 | 224,937 |
Mortgage warehouse lines of credit | Substandard | ||
Credit risk profile of portfolio | ||
Loans | 575 | |
Mortgage warehouse lines of credit | Acceptable and Above | ||
Credit risk profile of portfolio | ||
Loans | 336,757 | 224,937 |
Residential real estate | ||
Credit risk profile of portfolio | ||
Loans | 410,871 | 330,410 |
Residential real estate | Special Mention (Watch) | ||
Credit risk profile of portfolio | ||
Loans | 443 | |
Residential real estate | Substandard | ||
Credit risk profile of portfolio | ||
Loans | 1,606 | 729 |
Residential real estate | Acceptable and Above | ||
Credit risk profile of portfolio | ||
Loans | 408,822 | 329,681 |
Multi-family and healthcare financing | ||
Credit risk profile of portfolio | ||
Loans | 914,393 | 529,259 |
Multi-family and healthcare financing | Special Mention (Watch) | ||
Credit risk profile of portfolio | ||
Loans | 71,734 | 1,800 |
Multi-family and healthcare financing | Acceptable and Above | ||
Credit risk profile of portfolio | ||
Loans | 842,659 | 527,459 |
Commercial and commercial real estate | ||
Credit risk profile of portfolio | ||
Loans | 299,194 | 228,668 |
Commercial and commercial real estate | Special Mention (Watch) | ||
Credit risk profile of portfolio | ||
Loans | 14,650 | 12,608 |
Commercial and commercial real estate | Substandard | ||
Credit risk profile of portfolio | ||
Loans | 8,576 | 6,179 |
Commercial and commercial real estate | Acceptable and Above | ||
Credit risk profile of portfolio | ||
Loans | 275,968 | 209,881 |
Agricultural production and real estate | ||
Credit risk profile of portfolio | ||
Loans | 79,255 | 51,966 |
Agricultural production and real estate | Special Mention (Watch) | ||
Credit risk profile of portfolio | ||
Loans | 3,096 | 323 |
Agricultural production and real estate | Substandard | ||
Credit risk profile of portfolio | ||
Loans | 370 | 282 |
Agricultural production and real estate | Acceptable and Above | ||
Credit risk profile of portfolio | ||
Loans | 75,789 | 51,361 |
Consumer and margin loans | ||
Credit risk profile of portfolio | ||
Loans | 17,082 | 9,420 |
Consumer and margin loans | Special Mention (Watch) | ||
Credit risk profile of portfolio | ||
Loans | 681 | 1,563 |
Consumer and margin loans | Substandard | ||
Credit risk profile of portfolio | ||
Loans | 58 | 146 |
Consumer and margin loans | Acceptable and Above | ||
Credit risk profile of portfolio | ||
Loans | $ 16,343 | $ 7,711 |
Loans and Allowance for Loan _6
Loans and Allowance for Loan Losses - Aging Analysis Of The Recorded Investment In Loans (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Aging analysis of loan portfolio | ||
Past due loans | $ 3,217 | $ 4,253 |
Current loans | 2,054,910 | 1,370,407 |
Loans and Leases Receivable, Net of Deferred Income, Total | 2,058,127 | 1,374,660 |
30-59 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 917 | 59 |
60-89 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 282 | 1,054 |
Greater Than 90 Days | ||
Aging analysis of loan portfolio | ||
Past due loans | 2,018 | 3,140 |
Mortgage warehouse lines of credit | ||
Aging analysis of loan portfolio | ||
Past due loans | 324 | |
Current loans | 337,008 | 224,937 |
Loans and Leases Receivable, Net of Deferred Income, Total | 337,332 | 224,937 |
Mortgage warehouse lines of credit | Greater Than 90 Days | ||
Aging analysis of loan portfolio | ||
Past due loans | 324 | |
Residential real estate | ||
Aging analysis of loan portfolio | ||
Past due loans | 1,582 | 728 |
Current loans | 409,289 | 329,682 |
Loans and Leases Receivable, Net of Deferred Income, Total | 410,871 | 330,410 |
Residential real estate | 30-59 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 579 | |
Residential real estate | 60-89 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 178 | 194 |
Residential real estate | Greater Than 90 Days | ||
Aging analysis of loan portfolio | ||
Past due loans | 825 | 534 |
Multi-family and healthcare financing | ||
Aging analysis of loan portfolio | ||
Current loans | 914,393 | 529,259 |
Loans and Leases Receivable, Net of Deferred Income, Total | 914,393 | 529,259 |
Commercial and commercial real estate | ||
Aging analysis of loan portfolio | ||
Past due loans | 550 | 2,921 |
Current loans | 298,644 | 225,747 |
Loans and Leases Receivable, Net of Deferred Income, Total | 299,194 | 228,668 |
Commercial and commercial real estate | 30-59 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 245 | |
Commercial and commercial real estate | 60-89 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 52 | 860 |
Commercial and commercial real estate | Greater Than 90 Days | ||
Aging analysis of loan portfolio | ||
Past due loans | 253 | 2,061 |
Agricultural production and real estate | ||
Aging analysis of loan portfolio | ||
Past due loans | 679 | 458 |
Current loans | 78,576 | 51,508 |
Loans and Leases Receivable, Net of Deferred Income, Total | 79,255 | 51,966 |
Agricultural production and real estate | 30-59 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 91 | 59 |
Agricultural production and real estate | Greater Than 90 Days | ||
Aging analysis of loan portfolio | ||
Past due loans | 588 | 399 |
Consumer and margin loans | ||
Aging analysis of loan portfolio | ||
Past due loans | 82 | 146 |
Current loans | 17,000 | 9,274 |
Loans and Leases Receivable, Net of Deferred Income, Total | 17,082 | 9,420 |
Consumer and margin loans | 30-59 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 2 | |
Consumer and margin loans | 60-89 Days Past Due | ||
Aging analysis of loan portfolio | ||
Past due loans | 52 | |
Consumer and margin loans | Greater Than 90 Days | ||
Aging analysis of loan portfolio | ||
Past due loans | $ 28 | $ 146 |
Loans and Allowance for Loan _7
Loans and Allowance for Loan Losses - Impaired Loans and Specific Valuation Allowance (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Impaired loans without a specific allowance: | ||
Recorded investment | $ 7,639 | $ 4,848 |
Unpaid principal balance | 7,639 | 4,848 |
Impaired loans with a specific allowance: | ||
Recorded investment | 3,546 | 2,488 |
Unpaid principal balance | 3,546 | 2,488 |
Specific allowance | 645 | 362 |
Total impaired loans: | ||
Recorded investments | 11,185 | 7,336 |
Unpaid principal balance | 11,185 | 7,336 |
Specific allowance | 645 | 362 |
Mortgage warehouse lines of credit | ||
Impaired loans without a specific allowance: | ||
Recorded investment | 251 | |
Unpaid principal balance | 251 | |
Impaired loans with a specific allowance: | ||
Recorded investment | 324 | |
Unpaid principal balance | 324 | |
Specific allowance | 225 | |
Total impaired loans: | ||
Recorded investments | 575 | |
Unpaid principal balance | 575 | |
Specific allowance | 225 | |
Residential real estate | ||
Impaired loans without a specific allowance: | ||
Recorded investment | 1,606 | 729 |
Unpaid principal balance | 1,606 | 729 |
Total impaired loans: | ||
Recorded investments | 1,606 | 729 |
Unpaid principal balance | 1,606 | 729 |
Commercial and commercial real estate | ||
Impaired loans without a specific allowance: | ||
Recorded investment | 5,636 | 4,119 |
Unpaid principal balance | 5,636 | 4,119 |
Impaired loans with a specific allowance: | ||
Recorded investment | 2,940 | 2,060 |
Unpaid principal balance | 2,940 | 2,060 |
Specific allowance | 400 | 200 |
Total impaired loans: | ||
Recorded investments | 8,576 | 6,179 |
Unpaid principal balance | 8,576 | 6,179 |
Specific allowance | 400 | 200 |
Agricultural production and real estate | ||
Impaired loans without a specific allowance: | ||
Recorded investment | 88 | |
Unpaid principal balance | 88 | |
Impaired loans with a specific allowance: | ||
Recorded investment | 282 | 282 |
Unpaid principal balance | 282 | 282 |
Specific allowance | 20 | 16 |
Total impaired loans: | ||
Recorded investments | 370 | 282 |
Unpaid principal balance | 370 | 282 |
Specific allowance | 20 | 16 |
Consumer and margin loans | ||
Impaired loans without a specific allowance: | ||
Recorded investment | 58 | |
Unpaid principal balance | 58 | |
Impaired loans with a specific allowance: | ||
Recorded investment | 146 | |
Unpaid principal balance | 146 | |
Specific allowance | 146 | |
Total impaired loans: | ||
Recorded investments | 58 | 146 |
Unpaid principal balance | $ 58 | 146 |
Specific allowance | $ 146 |
Loans and Allowance for Loan _8
Loans and Allowance for Loan Losses - Average Recorded Investment and Interest Income Recognized (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Impaired Loans | |||
Average recorded investment in impaired loans | $ 11,830 | $ 4,338 | $ 2,394 |
Interest income recognized | 528 | 183 | 39 |
Mortgage warehouse lines of credit | |||
Impaired Loans | |||
Average recorded investment in impaired loans | 932 | ||
Interest income recognized | 59 | ||
Residential real estate | |||
Impaired Loans | |||
Average recorded investment in impaired loans | 1,485 | 156 | 155 |
Interest income recognized | 50 | 1 | |
Commercial and commercial real estate | |||
Impaired Loans | |||
Average recorded investment in impaired loans | 8,872 | 3,703 | 2,222 |
Interest income recognized | 375 | 182 | 39 |
Agricultural production and real estate | |||
Impaired Loans | |||
Average recorded investment in impaired loans | 489 | 282 | $ 17 |
Interest income recognized | 43 | ||
Consumer and margin loans | |||
Impaired Loans | |||
Average recorded investment in impaired loans | 52 | $ 197 | |
Interest income recognized | $ 1 |
Loans and Allowance for Loan _9
Loans and Allowance for Loan Losses - Non Accrual Loans and Loans Past Due 90 Days Or More and Still Accruing (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Loan portfolio past due loans | ||
Nonaccrual | $ 1,904 | $ 2,548 |
Total Loans Greater than 90 Days & Accruing | 507 | 592 |
Mortgage warehouse lines of credit | ||
Loan portfolio past due loans | ||
Nonaccrual | 575 | |
Residential real estate | ||
Loan portfolio past due loans | ||
Nonaccrual | 893 | 60 |
Total Loans Greater than 90 Days & Accruing | 74 | 475 |
Commercial and commercial real estate | ||
Loan portfolio past due loans | ||
Nonaccrual | 136 | 2,060 |
Total Loans Greater than 90 Days & Accruing | 117 | |
Agricultural production and real estate | ||
Loan portfolio past due loans | ||
Nonaccrual | 282 | 282 |
Total Loans Greater than 90 Days & Accruing | 307 | 117 |
Consumer and margin loans | ||
Loan portfolio past due loans | ||
Nonaccrual | 18 | $ 146 |
Total Loans Greater than 90 Days & Accruing | $ 9 |
Loans and Allowance for Loan_10
Loans and Allowance for Loan Losses - Troubled Debt and Modifications (Details) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($)item | Dec. 31, 2016item | |
Troubled debt and modifications | |||
Number of loans restructured during the last twelve months that defaulted during the period | item | 0 | 0 | 0 |
Commercial and commercial real estate | |||
Troubled debt and modifications | |||
Number of troubled debt restructuring | 1 | 1 | 0 |
Commercial and commercial real estate | Modification of terms | |||
Troubled debt and modifications | |||
Recorded investment, before modification | $ | $ 2 | $ 2 | |
Recorded investment, after modification | $ | $ 2 | $ 2 | |
Residential real estate | |||
Troubled debt and modifications | |||
Number of loans in the process of foreclosure | item | 0 | 0 | 0 |
Derivative Financial Instrume_3
Derivative Financial Instruments (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Derivative Financial Instruments | |
Derivative assets, fair value | $ 70 |
Derivative liabilities, fair value | 9 |
The periodic changes in the fair value of the derivative financial instruments on the condensed consolidated statements of income | |
Net derivative gains (losses) | 6 |
Interest Rate Lock Commitments | |
Derivative Financial Instruments | |
Notional amount | 8,812 |
The periodic changes in the fair value of the derivative financial instruments on the condensed consolidated statements of income | |
Net derivative gains (losses) | 70 |
Interest Rate Lock Commitments | Derivative assets | |
Derivative Financial Instruments | |
Derivative assets, fair value | 70 |
Forward Contracts | |
Derivative Financial Instruments | |
Notional amount | 19,640 |
The periodic changes in the fair value of the derivative financial instruments on the condensed consolidated statements of income | |
Net derivative gains (losses) | (64) |
Forward Contracts | Derivative liabilities | |
Derivative Financial Instruments | |
Derivative liabilities, fair value | $ 9 |
Loan Servicing (Details)
Loan Servicing (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Loan Servicing | |||
Balance, beginning of period | $ 66,079 | $ 53,670 | $ 55,553 |
Paydowns | (4,196) | (5,504) | (4,230) |
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model | 1,848 | 2,950 | (3,398) |
Balance, end of period | 77,844 | 66,079 | 53,670 |
Revenue from specified servicing fee | 8,700 | 8,800 | 7,500 |
Escrow funds | 412,400 | 502,700 | |
Originated and purchased servicing | |||
Loan Servicing | |||
Additions | $ 14,113 | 10,993 | $ 5,745 |
MCS | |||
Loan Servicing | |||
Additions | 3,970 | ||
Mortgage Loans | |||
Loan Servicing | |||
Sliding scale to deter prepayments (in years) | 10 years | ||
Unpaid principal balances of mortgage and other loans serviced for others | $ 5,800,000 | 5,000,000 | |
Unpaid principal balances of loans sub‑serviced for others | $ 3,100,000 | $ 2,000,000 |
Goodwill and Intangibles - Good
Goodwill and Intangibles - Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill | |||
Increase in goodwill | $ 13,600 | ||
Changes in goodwill: | |||
Balance, beginning of period | 3,902 | $ 523 | $ 523 |
Goodwill acquired during the period | 13,163 | 3,379 | |
Post-acquisition adjustment | 412 | ||
Balance, end of the period | 17,477 | 3,902 | 523 |
Multifamily | |||
Changes in goodwill: | |||
Balance, beginning of period | 3,379 | ||
Goodwill acquired during the period | 3,379 | ||
Post-acquisition adjustment | 412 | ||
Impairment losses | |||
Balance, end of the period | 3,791 | 3,379 | |
Banking | |||
Changes in goodwill: | |||
Balance, beginning of period | 523 | 523 | 523 |
Goodwill acquired during the period | 8,163 | ||
Post-acquisition adjustment | |||
Impairment losses | |||
Balance, end of the period | 8,686 | $ 523 | $ 523 |
Mortgage Warehousing | |||
Changes in goodwill: | |||
Goodwill acquired during the period | 5,000 | ||
Balance, end of the period | $ 5,000 |
Goodwill and Intangibles - Acqu
Goodwill and Intangibles - Acquisitions, Goodwill (Details) - USD ($) | Dec. 31, 2018 | Oct. 01, 2018 | Jan. 02, 2018 | Aug. 15, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Goodwill | |||||||
Goodwill acquired during the period | $ 13,163,000 | $ 3,379,000 | |||||
Post-acquisition adjustment | 412,000 | ||||||
Multifamily | |||||||
Goodwill | |||||||
Goodwill acquired during the period | 3,379,000 | ||||||
Post-acquisition adjustment | 412,000 | ||||||
Banking | |||||||
Goodwill | |||||||
Goodwill acquired during the period | 8,163,000 | ||||||
Post-acquisition adjustment | |||||||
Mortgage Warehousing | |||||||
Goodwill | |||||||
Goodwill acquired during the period | 5,000,000 | ||||||
NattyMac, LLC | Mortgage Warehousing | |||||||
Goodwill | |||||||
Goodwill acquired during the period | $ 5,000,000 | ||||||
FMNBP | Banking | |||||||
Goodwill | |||||||
Goodwill acquired during the period | $ 7,200,000 | ||||||
FMBI | Banking | |||||||
Goodwill | |||||||
Goodwill acquired during the period | $ 988,000 | ||||||
MCS | Multifamily | |||||||
Goodwill | |||||||
Goodwill acquired during the period | $ 3,400,000 | ||||||
Post-acquisition adjustment | $ 412,000 |
Goodwill and Intangibles - Inta
Goodwill and Intangibles - Intangible assets - (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Intangible assets | ||
Amortization of intangible assets | $ 218,000,000 | $ 82,000 |
Summary | ||
Gross Carrying Amount | 4,011,000 | 1,594,000 |
Accumulated Amortization | (469,000) | (82,000) |
Total | $ 3,542,000 | 1,512,000 |
Licenses | ||
Intangible assets | ||
Amortization period | 84 months | |
Summary | ||
Gross Carrying Amount | $ 1,370,000 | 1,370,000 |
Accumulated Amortization | (269,000) | (74,000) |
Total | $ 1,101,000 | 1,296,000 |
Trade names | ||
Intangible assets | ||
Amortization period | 120 months | |
Summary | ||
Gross Carrying Amount | $ 224,000 | 224,000 |
Accumulated Amortization | (31,000) | (8,000) |
Total | $ 193,000 | $ 216,000 |
Core Deposits | ||
Intangible assets | ||
Amortization period | 10 years | |
Summary | ||
Gross Carrying Amount | $ 2,417,000 | |
Accumulated Amortization | (169,000) | |
Total | $ 2,248,000 | |
FMNBP | Core Deposits | ||
Intangible assets | ||
Amortization period | 10 years | |
Amortization of intangible assets | $ 85,000 | |
FMBI | Core Deposits | ||
Intangible assets | ||
Amortization period | 10 years | |
Amortization of intangible assets | $ 84,000 |
Goodwill and Intangibles - Esti
Goodwill and Intangibles - Estimated amortization expense (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Estimated amortization expense | ||
2019 | $ 639 | |
2020 | 619 | |
2021 | 577 | |
2022 | 521 | |
2023 | 462 | |
Thereafter | 724 | |
Total | $ 3,542 | $ 1,512 |
Premises and Equipment (Details
Premises and Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 29, 2017 |
Premises and Equipment | |||
Total cost | $ 17,949 | $ 8,009 | |
Accumulated depreciation | (2,813) | (2,655) | |
Property, Plant and Equipment, Net, Total | 15,136 | 5,354 | |
Expected construction cost of new building | $ 17,900 | ||
Land | |||
Premises and Equipment | |||
Total cost | 3,072 | 2,260 | |
Buildings | |||
Premises and Equipment | |||
Total cost | 4,095 | 3,140 | |
Building in progress | |||
Premises and Equipment | |||
Total cost | 8,272 | 407 | |
Leasehold improvements | |||
Premises and Equipment | |||
Total cost | 83 | 71 | |
Furniture, fixtures and equipment | |||
Premises and Equipment | |||
Total cost | $ 2,427 | $ 2,131 |
Other Assets and Receivables (D
Other Assets and Receivables (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Investment in Qualified Affordable Housing Limited Partnerships | ||
Investments for qualified affordable housing limited partnerships | $ 17.2 | $ 15.6 |
Additional contribution on qualified affordable housing limited partnerships | 1.1 | |
Amortization expense | 1.2 | 0 |
Tax credit | $ 1.5 | $ 0 |
Deposits - Components (Details)
Deposits - Components (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Deposits | ||
Demand deposits | $ 1,548,969 | $ 1,279,145 |
Savings deposits | 1,001,663 | 1,255,460 |
Certificates of deposit | 680,454 | 408,956 |
Total deposits | $ 3,231,086 | $ 2,943,561 |
Deposits - Maturities of deposi
Deposits - Maturities of deposits (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Deposits | ||
Due within one year | $ 648,173 | |
Due in one year to two years | 18,062 | |
Due in two years to three years | 9,727 | |
Due in three years to four years | 2,964 | |
Due in four years to five years | 1,528 | |
Total time deposits | 680,454 | $ 408,956 |
Certificates of deposit of 250,000 or more | $ 46,700 | $ 56,800 |
Deposits - Brokered deposits (D
Deposits - Brokered deposits (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Deposits | ||
Brokered certificates of deposit | $ 578,471 | $ 347,000 |
Brokered savings deposits | 109,607 | 389,475 |
Brokered deposit on demand accounts | 300,134 | 205,039 |
Total brokered deposits | $ 988,212 | $ 941,514 |
Borrowings - Components (Detail
Borrowings - Components (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Borrowings | ||
Total borrowings | $ 195,453 | $ 56,612 |
Lines of credit | ||
Borrowings | ||
Total borrowings | 33,150 | 25,000 |
Short-term subordinated debt | ||
Borrowings | ||
Total borrowings | 10,582 | 30,000 |
FHLB advances | ||
Borrowings | ||
Total borrowings | $ 151,721 | $ 1,612 |
Borrowings - Other (Details)
Borrowings - Other (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Apr. 24, 2018 | Sep. 25, 2014 | |
Borrowings | ||||
Amount outstanding | $ 195,453 | $ 56,612 | ||
Mortgage loans pledged as collateral | 88,100 | 74,400 | ||
Available for sale securities and securities purchased under agreements to resell pledged as collateral | $ 269,300 | 407,700 | ||
Merchants Bank | ||||
Borrowings | ||||
Ownership in subsidiary (as a percent) | 100.00% | |||
Lines of credit | ||||
Borrowings | ||||
Amount outstanding | $ 33,150 | 25,000 | ||
Short-term subordinated debt | ||||
Borrowings | ||||
Amount outstanding | 10,582 | 30,000 | ||
Short-term subordinated debt | Home point | ||||
Borrowings | ||||
Amount outstanding | $ 0 | 30,000 | ||
Maximum investment by counterparty in Company's subordinated debt | $ 30,000 | |||
Short-term subordinated debt | Home point | LIBOR | ||||
Borrowings | ||||
Basis spread on variable rate (as a percent) | 3.50% | |||
Short-term subordinated debt | Customer | ||||
Borrowings | ||||
Amount outstanding | $ 10,600 | |||
Additional interest as a percentage of earnings | 50.00% | |||
Notice period of Non-renewal | 180 days | |||
Maximum investment by counterparty in Company's subordinated debt | $ 30,000 | |||
Short-term subordinated debt | Customer | LIBOR | ||||
Borrowings | ||||
Basis spread on variable rate (as a percent) | 3.50% | |||
Short-term subordinated debt | NMF | Home point | ||||
Borrowings | ||||
Additional interest as a percentage of earnings | 49.00% | |||
Short-term subordinated debt | Merchants Bank | NMF | ||||
Borrowings | ||||
Shares of NMF pledged as consideration for investment by counterparty in the subordinated debt of the Company (as a percent) | 100.00% | |||
FHLB advances | ||||
Borrowings | ||||
Amount outstanding | $ 151,721 | $ 1,612 | ||
FHLB advances | Minimum | ||||
Borrowings | ||||
FHLB advances interest rate | 1.79% | 2.27% | ||
FHLB advances | Maximum | ||||
Borrowings | ||||
FHLB advances interest rate | 4.74% | 4.74% | ||
Bank | Lines of credit | ||||
Borrowings | ||||
Maximum borrowing capacity | $ 25,000 | |||
Amount outstanding | $ 25,000 | $ 25,000 | ||
Tier 1 Leverage Ratio (as a percent) | 8.00% | |||
Bank | Lines of credit | LIBOR | ||||
Borrowings | ||||
Basis spread on variable rate (as a percent) | 3.23% | |||
Bank | Lines of credit | Minimum | LIBOR | ||||
Borrowings | ||||
Basis spread on variable rate (as a percent) | 1.85% | |||
Bank | Lines of credit | Maximum | LIBOR | ||||
Borrowings | ||||
Basis spread on variable rate (as a percent) | 4.20% | |||
Federal Home Loan Bank | Lines of credit | ||||
Borrowings | ||||
Maximum borrowing capacity | $ 8,200 | $ 0 | ||
Interest rate (as a percent) | 2.61% |
Borrowings - Maturities of FHLB
Borrowings - Maturities of FHLB advances (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Maturities of FHLB advances | ||
Total | $ 195,453 | $ 56,612 |
FHLB advances | ||
Maturities of FHLB advances | ||
Due within one year | 149,304 | |
Due in one year to two years | 590 | |
Due in two years to three years | 77 | |
Due in three years to four years | 59 | |
Due in four years to five years | 342 | |
Thereafter | 1,349 | |
Total | $ 151,721 | $ 1,612 |
Income Taxes - Tax Cuts and Job
Income Taxes - Tax Cuts and Jobs Act (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes | ||||
Statutory tax rate (as a percent) | 21.00% | 35.00% | 35.00% | |
Additional one-time income tax benefit related to remeasurement of certain deferred tax assets and liabilities | $ 6,900,000 | |||
Adjustment of deferred tax assets on unrealized losses on available for sale securities | $ 243,000 |
Income Taxes - Components (Deta
Income Taxes - Components (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Current tax payable | |||||||||||
Federal | $ 13,312 | $ 21,413 | $ 18,627 | ||||||||
State | 5,528 | 3,479 | 4,477 | ||||||||
Deferred tax payable | |||||||||||
Federal | 1,583 | (2,627) | (441) | ||||||||
State | 730 | 212 | (995) | ||||||||
Income tax expense | $ 5,699 | $ 5,584 | $ 5,186 | $ 4,684 | $ 1,330 | $ 6,445 | $ 9,091 | $ 5,611 | $ 21,153 | $ 22,477 | $ 21,668 |
Effective tax rate | 25.20% | 29.10% | 39.50% |
Income Taxes - Reconciliation (
Income Taxes - Reconciliation (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes | |||||||||||
Statutory tax rate (as a percent) | 21.00% | 35.00% | 35.00% | ||||||||
Computed at the statutory rate (21% for 2018 and 35% for 2017 and 2016) | $ 17,646 | $ 27,006 | $ 19,178 | ||||||||
Increase resulting from | |||||||||||
State income taxes | 4,944 | 2,399 | 2,264 | ||||||||
Effect of Tax Cuts and Jobs Act | (6,928) | ||||||||||
Low income housing tax credits | (1,533) | ||||||||||
Other | 96 | 226 | |||||||||
Income tax expense | $ 5,699 | $ 5,584 | $ 5,186 | $ 4,684 | $ 1,330 | $ 6,445 | $ 9,091 | $ 5,611 | $ 21,153 | $ 22,477 | $ 21,668 |
Income Taxes - Temporary differ
Income Taxes - Temporary differences (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets | ||
Allowance for loan losses | $ 3,366,000 | $ 2,216,000 |
Unrealized loss on available‑for‑sale securities | 148,000 | 442,000 |
Other | 854,000 | 1,548,000 |
Total assets | 4,368,000 | 4,206,000 |
Deferred tax liabilities | ||
Depreciation | (466,000) | (147,000) |
Intangible assets | (618,000) | |
Mortgage ‑ servicing rights | (17,477,000) | (15,548,000) |
Limited partnership investments | (2,212,000) | (1,446,000) |
Fair value adjustments on acquisition | (3,000) | |
Total liabilities | (20,776,000) | (17,141,000) |
Net deferred tax liability | (16,408,000) | $ (12,935,000) |
Federal operating loss carryforwards | $ 800,000 |
Regulatory Matters (Details)
Regulatory Matters (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Tier 1 Leverage | ||
Amount available without prior regulatory approval for dividends | $ 101,000 | |
Company | ||
Total Capital | ||
Total Capital (to risk-weighted assets), Actual, Capital Amount | $ 393,654 | $ 355,722 |
Total Capital (to risk weighted assets), Actual, Ratio (as a percent) | 12.30% | 13.70% |
Total Capital, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 255,884 | $ 207,657 |
Total Capital (to risk weighted assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 8.00% | 8.00% |
Tier I Capital | ||
Tier I Capital, (to risk-weighted assets), Actual, Capital Amount | $ 380,950 | $ 347,411 |
Tier I Capital (to risk weighted assets), Actual, Ratio (as a percent) | 11.90% | 13.40% |
Tier I Capital, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 191,913 | $ 155,743 |
Tier I Capital (to risk weighted assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 6.00% | 6.00% |
Common Equity Tier I Capital 1 | ||
Common Equity Tier I Capital 1, Actual, Capital Amount | $ 339,369 | $ 305,830 |
Common Equity Tier I Capital 1 (to risk weighted assets), Ratio (as a percent) | 10.60% | 11.80% |
Common Equity Tier I Capital 1, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 143,935 | $ 116,807 |
Common Equity Tier I Capital 1 (to risk weighted assets, Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 4.50% | 4.50% |
Tier 1 Leverage | ||
Tier 1 Leverage, Actual, Capital Amount | $ 380,950 | $ 347,411 |
Tier 1 Leverage (to average assets), Actual, Ratio (as a percent) | 10.00% | 10.90% |
Tier 1 Leverage, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 152,081 | $ 127,318 |
Tier 1 Leverage (to average assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 4.00% | 4.00% |
Federal Deposit Corporation And Federal Reserve Board | Rules Phased in beginning January 2016 | ||
Tier 1 Leverage | ||
New capital conservation buffer requirement beginning Ratio | 0.625% | |
Basel III Capital Rules related to CET1, period (in years) | 4 years | |
Additional capital conservation buffer requirement subsequent years Ratio | 2.50% | |
Merchants Bank | ||
Total Capital | ||
Total Capital (to risk-weighted assets), Actual, Capital Amount | $ 412,386 | $ 406,638 |
Total Capital (to risk weighted assets), Actual, Ratio (as a percent) | 13.30% | 15.70% |
Total Capital, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 248,290 | $ 207,567 |
Total Capital (to risk weighted assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 8.00% | 8.00% |
Total capital, Minimum Amount To Be Well Capitalized, Capital Amount | $ 310,363 | $ 259,459 |
Total Capital (to risk weighted assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 10.00% | 10.00% |
Tier I Capital | ||
Tier I Capital, (to risk-weighted assets), Actual, Capital Amount | $ 399,815 | $ 398,327 |
Tier I Capital (to risk weighted assets), Actual, Ratio (as a percent) | 12.90% | 15.40% |
Tier I Capital, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 186,218 | $ 155,675 |
Tier I Capital (to risk weighted assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 6.00% | 6.00% |
Tier I Capital, Minimum Amount To Be Well Capitalized, Capital Amount | $ 248,290 | $ 207,567 |
Tier I Capital (to risk weighted assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 8.00% | 8.00% |
Common Equity Tier I Capital 1 | ||
Common Equity Tier I Capital 1, Actual, Capital Amount | $ 399,815 | $ 398,327 |
Common Equity Tier I Capital 1 (to risk weighted assets), Ratio (as a percent) | 12.90% | 15.40% |
Common Equity Tier I Capital 1, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 139,663 | $ 116,756 |
Common Equity Tier I Capital 1 (to risk weighted assets, Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 4.50% | 4.50% |
Common Equity Tier I Capital 1, Minimum Amount To Be Well Capitalized, Capital Amount | $ 201,736 | $ 168,648 |
Common Equity Tier I Capital 1 (to risk weighted assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 6.50% | 6.50% |
Tier 1 Leverage | ||
Tier 1 Leverage, Actual, Capital Amount | $ 399,815 | $ 398,327 |
Tier 1 Leverage (to average assets), Actual, Ratio (as a percent) | 11.00% | 12.50% |
Tier 1 Leverage, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 145,723 | $ 127,593 |
Tier 1 Leverage (to average assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 4.00% | 4.00% |
Tier 1 Leverage, Minimum Amount To Be Well Capitalized, Capital Amount | $ 182,154 | $ 159,491 |
Tier 1 Leverage (to average assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 5.00% | 5.00% |
FMBI | ||
Total Capital | ||
Total Capital (to risk-weighted assets), Actual, Capital Amount | $ 17,537 | |
Total Capital (to risk weighted assets), Actual, Ratio (as a percent) | 18.60% | |
Total Capital, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 7,559 | |
Total Capital (to risk weighted assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 8.00% | |
Total capital, Minimum Amount To Be Well Capitalized, Capital Amount | $ 9,448 | |
Total Capital (to risk weighted assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 10.00% | |
Tier I Capital | ||
Tier I Capital, (to risk-weighted assets), Actual, Capital Amount | $ 17,404 | |
Tier I Capital (to risk weighted assets), Actual, Ratio (as a percent) | 18.40% | |
Tier I Capital, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 5,669 | |
Tier I Capital (to risk weighted assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 6.00% | |
Tier I Capital, Minimum Amount To Be Well Capitalized, Capital Amount | $ 7,559 | |
Tier I Capital (to risk weighted assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 8.00% | |
Common Equity Tier I Capital 1 | ||
Common Equity Tier I Capital 1, Actual, Capital Amount | $ 17,404 | |
Common Equity Tier I Capital 1 (to risk weighted assets), Ratio (as a percent) | 18.40% | |
Common Equity Tier I Capital 1, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 4,252 | |
Common Equity Tier I Capital 1 (to risk weighted assets, Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 4.50% | |
Common Equity Tier I Capital 1, Minimum Amount To Be Well Capitalized, Capital Amount | $ 6,141 | |
Common Equity Tier I Capital 1 (to risk weighted assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 6.50% | |
Tier 1 Leverage | ||
Tier 1 Leverage, Actual, Capital Amount | $ 17,404 | |
Tier 1 Leverage (to average assets), Actual, Ratio (as a percent) | 10.80% | |
Tier 1 Leverage, Minimum Amount Required for Adequately Capitalized, Capital Amount | $ 6,453 | |
Tier 1 Leverage (to average assets), Minimum Amount Required for Adequately Capitalized, Ratio (as a percent) | 4.00% | |
Tier 1 Leverage, Minimum Amount To Be Well Capitalized, Capital Amount | $ 8,066 | |
Tier 1 Leverage (to average assets), Minimum Amount To Be Well Capitalized, Ratio (as a percent) | 5.00% |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Net Income | |||||||||||
Net income | $ 15,422 | $ 16,739 | $ 15,652 | $ 15,061 | $ 20,329 | $ 10,467 | $ 14,758 | $ 9,130 | $ 62,874 | $ 54,684 | $ 33,127 |
Dividends on preferred stock | (832) | (833) | (832) | (833) | (833) | (833) | (832) | (832) | (3,330) | (3,330) | (2,002) |
Net Income Allocated to Common Shareholders | $ 14,590 | $ 15,906 | $ 14,820 | $ 14,228 | $ 19,496 | $ 9,634 | $ 13,926 | $ 8,298 | $ 59,544 | $ 51,354 | $ 31,125 |
Weighted-Average Shares | |||||||||||
Weighted average shares - Basic | 28,692,955 | 22,551,452 | 21,111,208 | ||||||||
Effect of dilutive securities-restricted stock awards | 31,464 | 16,702 | 2,227 | ||||||||
Weighted average shares - diluted | 28,724,419 | 22,568,154 | 21,113,435 | ||||||||
Per Share Amount | |||||||||||
Basic earnings per share | $ 0.51 | $ 0.55 | $ 0.52 | $ 0.50 | $ 0.73 | $ 0.45 | $ 0.66 | $ 0.39 | $ 2.08 | $ 2.28 | $ 1.47 |
Diluted earnings per share | $ 0.51 | $ 0.55 | $ 0.52 | $ 0.50 | $ 0.73 | $ 0.45 | $ 0.66 | $ 0.39 | $ 2.07 | $ 2.28 | $ 1.47 |
Stock Splits (Details)
Stock Splits (Details) | Jul. 06, 2017 | Mar. 31, 2016 | Dec. 31, 2018shares | Dec. 31, 2017shares | Jul. 05, 2017shares |
Stock Splits | |||||
Authorized common shares | 50,000,000 | 50,000,000 | 50,000,000 | ||
Stock split ratio | 2.5 | 2 |
Initial Public Offering of Co_2
Initial Public Offering of Common Stock (Details) - USD ($) $ in Thousands | Nov. 02, 2017 | Oct. 26, 2017 | Dec. 31, 2017 |
Initial Public Offering of Common Stock | |||
Gross proceeds from offering | $ 115,000 | ||
Proceeds from common stock offerings, net | 106,200 | $ 106,245 | |
Offering costs | $ 8,800 | ||
IPO | |||
Initial Public Offering of Common Stock | |||
Shares issued (in shares) | 6,250,000 | ||
Over-Allotment Option | |||
Initial Public Offering of Common Stock | |||
Shares issued (in shares) | 937,500 |
Private Placement Offering of_2
Private Placement Offering of Preferred Stock (Details) - Private Placement - Preferred Stock - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2018 | Dec. 31, 2016 | |
Private Placement Offering of Preferred Stock | |||
Shares issued to board of directors for annual fee (in shares) | 10,000 | 31,625 | |
Share price per share | $ 1,000 | $ 1,000 | |
Gross proceeds from offering | $ 10 | $ 31.6 | |
Net proceeds after offering expenses | $ 31.6 | ||
Dividend yield | 8.00% |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | Jan. 02, 2018 | May 08, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Related Party Transactions | |||||
Deposits from related parties held by the Company | $ 11,100,000 | $ 4,700,000 | |||
Percentage of purchase price equal to the price paid by Company’s directors and executive officers, plus expenses and a cost of funds | 3.75% | ||||
Total assets | 3,884,163,000 | 3,393,133,000 | $ 2,718,512,000 | ||
Total deposits | 3,231,086,000 | 2,943,561,000 | |||
FMBI | |||||
Related Party Transactions | |||||
Total assets | 43,000,000 | ||||
Total deposits | $ 36,900,000 | ||||
Key loan processing vendors | |||||
Related Party Transactions | |||||
Ownership interest as a percentage | 30.00% | ||||
Fees paid to related party | 3,400,000 | $ 3,700,000 | |||
Amount accrued for services received | 226,000 | 253,000 | |||
Law firm | |||||
Related Party Transactions | |||||
Fees paid to related party | $ 3,700,000 | 3,000,000 | $ 2,100,000 | ||
Messrs. Petrie and Rogers | Purchase Agreement | FMBI | |||||
Related Party Transactions | |||||
Purchase price excluding cost of funds | $ 5,400,000 | ||||
Amount of cost of funds to be paid for each thirty days after June 30, 2017, proprated to the closing date | $ 16,000 | ||||
Period for which cost of fund to be raised by company | 30 days | ||||
Purchase price | $ 5,500,000 | ||||
FMBI | |||||
Related Party Transactions | |||||
Total assets | $ 43,000,000 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Employee benefits | |||
Matching contribution equals to employees deferrals | 100.00% | ||
Employer contributions to contribution plans | $ 464,000 | $ 294,000 | $ 245,000 |
Maximum | |||
Employee benefits | |||
Matching contribution as a percentage of employees compensation | 3.00% |
Share-Based Payment Plans (Deta
Share-Based Payment Plans (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Non executive directors | |||
Plan disclosures | |||
Shares issued | 1,830 | 0 | |
Value of shares available for issuance for compensation related to annual fees | $ 10,000 | ||
Expense recognized | $ 50,000 | ||
2016 Plan | Restricted stock | |||
Plan disclosures | |||
Percentage of common shares and cash receivable under plan | 50.00% | ||
Shares issued | 7,039 | 3,200 | |
Expense recognized | $ 171,000 | $ 458,000 | $ 57,000 |
Unvested shares awarded | 83,708 | 66,347 | |
Unrecognized compensation cost | $ 1,100,000 | $ 962,000 |
Disclosures about Fair Value _3
Disclosures about Fair Value of Assets and Liabilities - Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Disclosures about Fair Value of Assets and Liabilities | ||||
Trading securities | $ 163,419,000 | $ 140,837,000 | ||
Available for sale securities | 331,071,000 | 408,371,000 | ||
Loans held for sale | 11,886,000 | |||
Mortgage servicing rights | 77,844,000 | 66,079,000 | $ 53,670,000 | $ 55,553,000 |
Derivative assets | 70,000 | |||
Derivative liabilities | 9,000 | |||
Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Trading securities | 163,419,000 | 140,837,000 | ||
Loans held for sale | 11,886,000 | |||
Mortgage servicing rights | 77,844,000 | 66,079,000 | ||
Recurring | Interest Rate Lock Commitments | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Derivative assets | 70,000 | |||
Recurring | Forward Contracts | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Derivative liabilities | 9,000 | |||
Level 2 | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Loans held for sale | 820,569,000 | 995,319,000 | ||
Level 2 | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Trading securities | 163,419,000 | 140,837,000 | ||
Loans held for sale | 11,886,000 | |||
Level 2 | Recurring | Forward Contracts | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Derivative liabilities | 9,000 | |||
Level 3 | Interest Rate Lock Commitments | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Derivative assets | 70 | |||
Level 3 | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Mortgage servicing rights | 77,844,000 | 66,079,000 | ||
Level 3 | Recurring | Interest Rate Lock Commitments | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Derivative assets | 70,000 | |||
Treasury notes | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 11,941,000 | 992,000 | ||
Treasury notes | Level 1 | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 11,941,000 | 992,000 | ||
Federal agencies | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 236,930,000 | 374,731,000 | ||
Federal agencies | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 236,930,000 | 374,731,000 | ||
Federal agencies | Level 2 | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 236,930,000 | 374,731,000 | ||
Municipals | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 21,332,000 | 6,688,000 | ||
Municipals | Level 2 | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 21,332,000 | |||
Municipals | Level 3 | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 6,688,000 | |||
Mortgage-backed - Government-sponsored entity (GSE) - residential | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 60,868,000 | 25,960,000 | ||
Mortgage-backed - Government-sponsored entity (GSE) - residential | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | 60,868,000 | 25,960,000 | ||
Mortgage-backed - Government-sponsored entity (GSE) - residential | Level 2 | Recurring | ||||
Disclosures about Fair Value of Assets and Liabilities | ||||
Available for sale securities | $ 60,868,000 | $ 25,960,000 |
Disclosures about Fair Value _4
Disclosures about Fair Value of Assets and Liabilities - Reconciliation of Unobservable Inputs (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Mortgage servicing rights | |||
Reconciliation of significant unobservable inputs, assets: | |||
Balance, beginning of period | $ 66,079 | $ 53,670 | $ 55,553 |
Additions | |||
Originated and purchased servicing | 14,113 | 10,993 | 5,745 |
Acquisition of MCS | 3,970 | ||
Subtractions | |||
Paydown | (4,196) | (5,504) | (4,230) |
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model | 1,848 | 2,950 | (3,398) |
Balance, end of period | 77,844 | 66,079 | $ 53,670 |
Derivative assets | Interest Rate Lock Commitments | |||
Subtractions | |||
Changes in fair value | 70 | ||
Balance, end of period | 70 | ||
Municipals | |||
Reconciliation of significant unobservable inputs, assets: | |||
Balance, beginning of period | 6,688 | ||
Additions | |||
Purchased servicing | 6,688 | ||
Subtractions | |||
Paydown | (257) | ||
Sales | (6,431) | ||
Balance, end of period | $ 6,688 | $ 6,688 |
Disclosures about Fair Value _5
Disclosures about Fair Value of Assets and Liabilities - Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Details) - Nonrecurring - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Disclosures about Fair Value of Assets and Liabilities | ||
Impaired loans (collateral dependent) | $ 2,639 | $ 2,126 |
Level 3 | ||
Disclosures about Fair Value of Assets and Liabilities | ||
Impaired loans (collateral dependent) | $ 2,639 | $ 2,126 |
Disclosures about Fair Value _6
Disclosures about Fair Value of Assets and Liabilities - Quantitative Information about Unobservable Inputs (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Quantitative information about unobservable inputs | ||||
Mortgage servicing rights | $ 77,844,000 | $ 66,079,000 | $ 53,670,000 | $ 55,553,000 |
Derivative assets | 70,000 | |||
Available-for-sale Securities | $ 331,071,000 | $ 408,371,000 | ||
Level 3 | Minimum | ||||
Quantitative information about unobservable inputs | ||||
Constant prepayment rate (as a percent) | 1.00% | 1.00% | ||
Level 3 | Maximum | ||||
Quantitative information about unobservable inputs | ||||
Constant prepayment rate (as a percent) | 30.00% | 36.00% | ||
Interest Rate Lock Commitments | Level 3 | ||||
Quantitative information about unobservable inputs | ||||
Derivative assets | $ 70 | |||
Mortgage servicing rights | Level 3 | ||||
Quantitative information about unobservable inputs | ||||
Mortgage servicing rights | $ 77,844,000 | $ 66,079,000 | ||
Mortgage servicing rights | Level 3 | Minimum | ||||
Quantitative information about unobservable inputs | ||||
Discount rate (as a percent) | 8.00% | 8.00% | ||
Mortgage servicing rights | Level 3 | Maximum | ||||
Quantitative information about unobservable inputs | ||||
Discount rate (as a percent) | 13.00% | 13.00% | ||
Collateral-dependent impaired loans | Level 3 | ||||
Quantitative information about unobservable inputs | ||||
Collateral-dependent impaired loans | $ 2,639,000 | $ 2,126,000 | ||
Collateral-dependent impaired loans | Level 3 | Minimum | ||||
Quantitative information about unobservable inputs | ||||
Marketability discount (as a percent) | 17.00% | |||
Collateral-dependent impaired loans | Level 3 | Maximum | ||||
Quantitative information about unobservable inputs | ||||
Marketability discount (as a percent) | 59.00% | |||
Municipals | ||||
Quantitative information about unobservable inputs | ||||
Available-for-sale Securities | $ 21,332,000 | 6,688,000 | ||
Municipals | Level 3 | ||||
Quantitative information about unobservable inputs | ||||
Available-for-sale Securities | $ 6,700,000 | |||
Measurement Input, Maturity | Interest Rate Lock Commitments | Level 3 | Minimum | ||||
Quantitative information about unobservable inputs | ||||
Loan closing rates (as a percent) | 95.00% | |||
Measurement Input, Maturity | Interest Rate Lock Commitments | Level 3 | Maximum | ||||
Quantitative information about unobservable inputs | ||||
Loan closing rates (as a percent) | 100.00% |
Disclosures about Fair Value _7
Disclosures about Fair Value of Assets and Liabilities - Carrying Value and Estimated Fair Value (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Financial assets: | ||
Loans held for sale | $ 11,886 | |
Carrying Value | ||
Financial assets: | ||
Cash and cash equivalents | 336,524 | $ 359,519 |
Securities purchased under agreements to resell | 6,875 | 7,043 |
FHLB stock | 7,974 | 7,539 |
Loans held for sale | 820,569 | 995,319 |
Loans, net | 2,045,423 | 1,366,349 |
Interest receivable | 13,827 | 8,326 |
Financial liabilities: | ||
Deposits | 3,231,086 | 2,943,561 |
Lines of credit | 33,150 | 25,000 |
Short-term subordinated debt | 10,582 | 30,000 |
FHLB advances | 151,721 | 1,612 |
Interest payable | 4,132 | 2,817 |
Fair Value | ||
Financial assets: | ||
Cash and cash equivalents | 336,524 | 359,519 |
Securities purchased under agreements to resell | 6,875 | 7,043 |
FHLB stock | 7,974 | 7,539 |
Loans held for sale | 820,569 | 995,319 |
Loans, net | 2,041,772 | 1,364,568 |
Interest receivable | 13,827 | 8,326 |
Financial liabilities: | ||
Deposits | 3,230,397 | 2,943,173 |
Lines of credit | 33,150 | 25,000 |
Short-term subordinated debt | 10,582 | 30,000 |
FHLB advances | 151,723 | 1,620 |
Interest payable | 4,132 | 2,817 |
Level 1 | ||
Financial assets: | ||
Cash and cash equivalents | 336,524 | 359,519 |
Financial liabilities: | ||
Deposits | 2,550,632 | 2,534,605 |
Level 2 | ||
Financial assets: | ||
Securities purchased under agreements to resell | 6,875 | 7,043 |
FHLB stock | 7,974 | 7,539 |
Loans held for sale | 820,569 | 995,319 |
Interest receivable | 13,827 | 8,326 |
Financial liabilities: | ||
Deposits | 679,765 | 408,568 |
Lines of credit | 33,150 | 25,000 |
Short-term subordinated debt | 10,582 | 30,000 |
FHLB advances | 151,723 | 1,620 |
Interest payable | 4,132 | 2,817 |
Level 3 | ||
Financial assets: | ||
Loans, net | $ 2,041,772 | $ 1,364,568 |
Significant Estimates and Con_2
Significant Estimates and Concentrations (Details) - Revenue - Customer concentration - Major Customer - Mortgage Warehousing - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Major Customer | ||
Total revenue | $ 14.3 | $ 14.7 |
Concentration risk (as a percent) | 10.00% | 15.00% |
Commitments and Credit Risk (De
Commitments and Credit Risk (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments and Credit Risk | |||
Commitments to fund loans pending closing | $ 507,000,000 | $ 221,300,000 | |
Undisbursed Commitment on construction loans | 457,800,000 | 101,100,000 | |
Outstanding line of credit | 782,400,000 | 613,800,000 | |
Rental expenses | 1,100,000 | 764,000 | $ 696,000 |
Due within one year | 1,021,000 | ||
Due in one year to two years | 1,085,000 | ||
Due in two years to three years | 736,000 | ||
Due in three years to four years | 550,000 | ||
Due in four years to five years | 554,000 | ||
Thereafter | 426,000 | ||
Total minimum lease payments | 4,372,000 | ||
Commitments to extend credit | |||
Commitments and Credit Risk | |||
Financial instrument whose contract amount represents credit risk | 676,987,000 | 437,585,000 | |
Irrevocable standby letters of credit | |||
Commitments and Credit Risk | |||
Financial instrument whose contract amount represents credit risk | 3,164,000 | 26,000,000 | |
Commitment letters of credit | |||
Commitments and Credit Risk | |||
Financial instrument whose contract amount represents credit risk | $ 19,866,000 | $ 31,031,000 | |
Minimum | |||
Commitments and Credit Risk | |||
Lease period | 1 year | ||
Maximum | |||
Commitments and Credit Risk | |||
Lease period | 7 years |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Segment Information | |||||||||||
Total interest income | $ 39,825 | $ 37,577 | $ 34,123 | $ 29,038 | $ 26,910 | $ 26,006 | $ 22,464 | $ 19,007 | $ 140,563 | $ 94,387 | $ 72,939 |
Total interest expense | 15,650 | 14,095 | 11,917 | 8,930 | 7,958 | 7,616 | 6,740 | 5,476 | 50,592 | 27,790 | 18,968 |
Net interest income | 24,175 | 23,482 | 22,206 | 20,108 | 18,952 | 18,390 | 15,724 | 13,531 | 89,971 | 66,597 | 53,971 |
Provision for loan losses | 1,608 | 617 | 998 | 1,406 | 1,400 | 592 | 240 | 240 | 4,629 | 2,472 | 960 |
Net Interest Income After Provision for Loan Losses | 22,567 | 22,865 | 21,208 | 18,702 | 17,552 | 17,798 | 15,484 | 13,291 | 85,342 | 64,125 | 53,011 |
Total noninterest income | 14,735 | 11,907 | 11,630 | 11,313 | 14,907 | 8,056 | 16,626 | 8,091 | 49,585 | 47,680 | 28,504 |
Noninterest expense | 16,181 | 12,449 | 12,000 | 10,270 | 10,800 | 8,942 | 8,261 | 6,641 | 50,900 | 34,644 | 26,720 |
Income Before Income Taxes | 21,121 | 22,323 | 20,838 | 19,745 | 21,659 | 16,912 | 23,849 | 14,741 | 84,027 | 77,161 | 54,795 |
Income Tax Expense (Benefit) | 5,699 | 5,584 | 5,186 | 4,684 | 1,330 | 6,445 | 9,091 | 5,611 | 21,153 | 22,477 | 21,668 |
Net Income | 15,422 | $ 16,739 | $ 15,652 | $ 15,061 | 20,329 | $ 10,467 | $ 14,758 | $ 9,130 | 62,874 | 54,684 | 33,127 |
Total assets | 3,884,163 | 3,393,133 | 3,884,163 | 3,393,133 | 2,718,512 | ||||||
Other | |||||||||||
Segment Information | |||||||||||
Total interest income | 1,735 | 721 | |||||||||
Total interest expense | (3,285) | (736) | 1,187 | ||||||||
Net interest income | 5,020 | 1,457 | (1,187) | ||||||||
Net Interest Income After Provision for Loan Losses | 5,020 | 1,457 | (1,187) | ||||||||
Total noninterest income | (1,946) | (814) | |||||||||
Noninterest expense | 9,098 | 6,188 | 3,133 | ||||||||
Income Before Income Taxes | (6,024) | (5,545) | (4,320) | ||||||||
Income Tax Expense (Benefit) | (1,819) | (1,917) | (1,708) | ||||||||
Net Income | (4,205) | (3,628) | (2,612) | ||||||||
Total assets | 30,598 | 16,855 | 30,598 | 16,855 | 13,453 | ||||||
Multifamily | Operating Segments | |||||||||||
Segment Information | |||||||||||
Total interest income | 712 | 414 | 237 | ||||||||
Net interest income | 712 | 414 | 237 | ||||||||
Net Interest Income After Provision for Loan Losses | 712 | 414 | 237 | ||||||||
Total noninterest income | 45,831 | 43,715 | 22,798 | ||||||||
Noninterest expense | 19,205 | 10,911 | 7,474 | ||||||||
Income Before Income Taxes | 27,338 | 33,218 | 15,561 | ||||||||
Income Tax Expense (Benefit) | 7,528 | 4,557 | 6,153 | ||||||||
Net Income | 19,810 | 28,661 | 9,408 | ||||||||
Total assets | 166,102 | 134,390 | 166,102 | 134,390 | 98,553 | ||||||
Mortgage Warehousing | Operating Segments | |||||||||||
Segment Information | |||||||||||
Total interest income | 58,784 | 48,798 | 43,352 | ||||||||
Total interest expense | 24,369 | 13,673 | 11,235 | ||||||||
Net interest income | 34,415 | 35,125 | 32,117 | ||||||||
Provision for loan losses | 1,372 | 452 | (247) | ||||||||
Net Interest Income After Provision for Loan Losses | 33,043 | 34,673 | 32,364 | ||||||||
Total noninterest income | 2,550 | 2,836 | 3,220 | ||||||||
Noninterest expense | 7,721 | 7,710 | 7,730 | ||||||||
Income Before Income Taxes | 27,872 | 29,799 | 27,854 | ||||||||
Income Tax Expense (Benefit) | 6,872 | 11,558 | 11,015 | ||||||||
Net Income | 21,000 | 18,241 | 16,839 | ||||||||
Total assets | 1,430,776 | 1,352,748 | 1,430,776 | 1,352,748 | 1,060,723 | ||||||
Banking | Operating Segments | |||||||||||
Segment Information | |||||||||||
Total interest income | 79,332 | 44,454 | 29,350 | ||||||||
Total interest expense | 29,508 | 14,853 | 6,546 | ||||||||
Net interest income | 49,824 | 29,601 | 22,804 | ||||||||
Provision for loan losses | 3,257 | 2,020 | 1,207 | ||||||||
Net Interest Income After Provision for Loan Losses | 46,567 | 27,581 | 21,597 | ||||||||
Total noninterest income | 3,150 | 1,943 | 2,486 | ||||||||
Noninterest expense | 14,876 | 9,835 | 8,383 | ||||||||
Income Before Income Taxes | 34,841 | 19,689 | 15,700 | ||||||||
Income Tax Expense (Benefit) | 8,572 | 8,279 | 6,208 | ||||||||
Net Income | 26,269 | 11,410 | 9,492 | ||||||||
Total assets | $ 2,256,687 | $ 1,889,140 | $ 2,256,687 | $ 1,889,140 | $ 1,545,783 |
Condensed Financial Informati_3
Condensed Financial Information (Parent Company Only) (Balance sheets) (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Assets | ||||
Cash and cash equivalents | $ 25,855 | $ 18,905 | ||
Total assets | 3,884,163 | 3,393,133 | $ 2,718,512 | |
Liabilities | ||||
Other liabilities | 20,943 | 13,064 | ||
Total liabilities | 3,462,926 | 3,025,659 | ||
Total shareholders' equity | 421,237 | 367,474 | $ 206,288 | $ 148,200 |
Total liabilities and shareholders' equity | 3,884,163 | 3,393,133 | ||
Reportable Legal Entities | Company | ||||
Assets | ||||
Cash and cash equivalents | 2,224 | 7,273 | ||
Investment in subsidiaries | 453,028 | 411,528 | ||
Other assets | 2,104 | 5,597 | ||
Total assets | 457,356 | 424,398 | ||
Liabilities | ||||
Line of credit payable | 25,000 | 25,000 | ||
Short‑term subordinated debt | 10,582 | 30,000 | ||
Other liabilities | 537 | 1,924 | ||
Total liabilities | 36,119 | 56,924 | ||
Total shareholders' equity | 421,237 | 367,474 | ||
Total liabilities and shareholders' equity | $ 457,356 | $ 424,398 |
Condensed Financial Informati_4
Condensed Financial Information (Parent Company Only) (Income statement) (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Expenses | |||||||||||
Interest expense | $ 15,650 | $ 14,095 | $ 11,917 | $ 8,930 | $ 7,958 | $ 7,616 | $ 6,740 | $ 5,476 | $ 50,592 | $ 27,790 | $ 18,968 |
Salaries and employee benefits | 32,240 | 21,472 | 14,313 | ||||||||
Professional fees | 2,585 | 1,516 | 1,298 | ||||||||
Income Tax Expense (Benefit) | 5,699 | 5,584 | 5,186 | 4,684 | 1,330 | 6,445 | 9,091 | 5,611 | 21,153 | 22,477 | 21,668 |
Net Income | $ 15,422 | $ 16,739 | $ 15,652 | $ 15,061 | $ 20,329 | $ 10,467 | $ 14,758 | $ 9,130 | 62,874 | 54,684 | 33,127 |
Comprehensive Income | 63,813 | 54,306 | 32,731 | ||||||||
Reportable Legal Entities | Company | |||||||||||
Income | |||||||||||
Dividends and return of capital from subsidiaries | 37,816 | 13,632 | 16,223 | ||||||||
Other income | 195 | 208 | 196 | ||||||||
Total income | 38,011 | 13,840 | 16,419 | ||||||||
Expenses | |||||||||||
Interest expense | 8,055 | 7,603 | 7,237 | ||||||||
Salaries and employee benefits | 1,216 | 1,617 | 77 | ||||||||
Professional fees | 707 | 341 | 138 | ||||||||
Other | 420 | 251 | 33 | ||||||||
Total expense | 10,398 | 9,812 | 7,485 | ||||||||
Income Before Income Tax and Equity in Undistributed Income of Subsidiaries | 27,613 | 4,028 | 8,934 | ||||||||
Income Tax Expense (Benefit) | (2,542) | (3,670) | (2,885) | ||||||||
Income Before Equity in Undistributed Income of Subsidiaries | 30,155 | 7,698 | 11,819 | ||||||||
Equity in Undistributed Income of Subsidiaries | 32,719 | 46,986 | 21,308 | ||||||||
Net Income | 62,874 | 54,684 | 33,127 | ||||||||
Comprehensive Income | $ 63,813 | $ 54,306 | $ 32,731 |
Condensed Financial Informati_5
Condensed Financial Information (Parent Company Only) (Cash flows) (Details) - USD ($) $ in Thousands | Nov. 02, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Operating activities: | ||||
Net income | $ 62,874 | $ 54,684 | $ 33,127 | |
Net cash provided by operating activities | 203,590 | (175,886) | (149,771) | |
Investing activities: | ||||
Other investing activities | 74 | 189 | (295) | |
Net cash used in investing activities | (509,066) | (523,137) | (265,302) | |
Financing activities: | ||||
Dividends paid | (10,216) | (7,950) | (6,224) | |
Proceeds from issuance of common stock | $ 106,200 | 106,245 | ||
Proceeds from issuance of preferred stock | 31,581 | |||
Net cash provided by financing activities | 282,481 | 612,841 | 413,973 | |
Net Change in Cash and Cash Equivalents | (22,995) | (86,182) | (1,100) | |
Cash and Cash Equivalents, Beginning of Period | 359,519 | 445,701 | 446,801 | |
Cash and Cash Equivalents, End of Period | 336,524 | 359,519 | 445,701 | |
Reportable Legal Entities | Company | ||||
Operating activities: | ||||
Net income | 62,874 | 54,684 | 33,127 | |
Adjustments to reconcile net income to net cash used in operating activities | (30,522) | (44,185) | (26,561) | |
Net cash provided by operating activities | 32,352 | 10,499 | 6,566 | |
Investing activities: | ||||
Return of capital from/(contributed capital to) subsidiaries | 19,368 | (101,868) | (31,625) | |
Net cash paid for acquisitions | (27,209) | |||
Other investing activities | 74 | 189 | (295) | |
Net cash used in investing activities | (7,767) | (101,679) | (31,920) | |
Financing activities: | ||||
Net change in short-term subordinated debt | 19,418 | |||
Dividends paid | (10,216) | (7,950) | (6,224) | |
Proceeds from issuance of common stock | 106,245 | |||
Proceeds from issuance of preferred stock | 31,581 | |||
Net cash provided by financing activities | (29,634) | 98,295 | 25,357 | |
Net Change in Cash and Cash Equivalents | (5,049) | 7,115 | 3 | |
Cash and Cash Equivalents, Beginning of Period | 7,273 | 158 | 155 | |
Cash and Cash Equivalents, End of Period | $ 2,224 | $ 7,273 | $ 158 |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Details) | Dec. 31, 2017USD ($) |
Recent Accounting Pronouncements | |
Stranded tax effects included in AOCI | $ 243,000 |
Quarterly Condensed Financial_3
Quarterly Condensed Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Quarterly Condensed Financial Information (Unaudited) | |||||||||||
Interest income | $ 39,825 | $ 37,577 | $ 34,123 | $ 29,038 | $ 26,910 | $ 26,006 | $ 22,464 | $ 19,007 | $ 140,563 | $ 94,387 | $ 72,939 |
Interest expense | 15,650 | 14,095 | 11,917 | 8,930 | 7,958 | 7,616 | 6,740 | 5,476 | 50,592 | 27,790 | 18,968 |
Net interest income | 24,175 | 23,482 | 22,206 | 20,108 | 18,952 | 18,390 | 15,724 | 13,531 | 89,971 | 66,597 | 53,971 |
Provision for loan losses | 1,608 | 617 | 998 | 1,406 | 1,400 | 592 | 240 | 240 | 4,629 | 2,472 | 960 |
Net Interest Income After Provision for Loan Losses | 22,567 | 22,865 | 21,208 | 18,702 | 17,552 | 17,798 | 15,484 | 13,291 | 85,342 | 64,125 | 53,011 |
Noninterest income | 14,735 | 11,907 | 11,630 | 11,313 | 14,907 | 8,056 | 16,626 | 8,091 | 49,585 | 47,680 | 28,504 |
Noninterest expense | 16,181 | 12,449 | 12,000 | 10,270 | 10,800 | 8,942 | 8,261 | 6,641 | 50,900 | 34,644 | 26,720 |
Income Before Income Taxes | 21,121 | 22,323 | 20,838 | 19,745 | 21,659 | 16,912 | 23,849 | 14,741 | 84,027 | 77,161 | 54,795 |
Income Tax Expense (Benefit) | 5,699 | 5,584 | 5,186 | 4,684 | 1,330 | 6,445 | 9,091 | 5,611 | 21,153 | 22,477 | 21,668 |
Net Income | 15,422 | 16,739 | 15,652 | 15,061 | 20,329 | 10,467 | 14,758 | 9,130 | 62,874 | 54,684 | 33,127 |
Less: preferred stock dividends | 832 | 833 | 832 | 833 | 833 | 833 | 832 | 832 | 3,330 | 3,330 | 2,002 |
Net Income Allocated to Common Shareholders | $ 14,590 | $ 15,906 | $ 14,820 | $ 14,228 | $ 19,496 | $ 9,634 | $ 13,926 | $ 8,298 | $ 59,544 | $ 51,354 | $ 31,125 |
Per common share data: | |||||||||||
Basic Earnings Per Share (in dollar per share) | $ 0.51 | $ 0.55 | $ 0.52 | $ 0.50 | $ 0.73 | $ 0.45 | $ 0.66 | $ 0.39 | $ 2.08 | $ 2.28 | $ 1.47 |
Diluted Earnings Per Share (in dollar per share) | $ 0.51 | $ 0.55 | $ 0.52 | $ 0.50 | $ 0.73 | $ 0.45 | $ 0.66 | $ 0.39 | $ 2.07 | $ 2.28 | $ 1.47 |